New York Trusts & Estates Litigation Blog

Potential Creditor of Trust Beneficiary Not Interested Party In Accounting Proceeding

Eric Penzer — Fri, 30 Mar 2012 13:12:56 -0500

Determining the identity of permissible or necessary parties to an accounting proceeding is often a simple task. But in rare cases, the answer is not always so easy. Most recently, in Matter of Cohen, Nassau County Surrogate Edward W. McCarty III was called upon to determine whether a potential creditor of a trust beneficiary was a “person interested” in a trust accounting proceeding. The Court answered the question in the negative.

Michael S. Cohen, died on March 18, 2002. Under the terms of his will (which was admitted to probate), the decedent directed that a trust be created for the benefit of his adopted son, Kevin Cohen (“Cohen”), the decedent’s only child. The will further directed that the trust terminate ten years after the decedent’s death, i.e., March 18, 2012, and that all remaining principal and income be distributed to Cohen (or, if he did not survive the termination of the trust, his minor daughters).

Cohen, formerly an attorney, was convicted in 2010 of 37 counts (including second-degree grand larceny, 11 counts of third-degree grand larceny and 10 counts of third-degree forgery) for stealing more than $300,000 from clients who thought he was assisting them in arranging adoptions; but the children did not actually exist. A criminal restitution order under Criminal Procedure Law § 420.10 was entered against him. The Lawyers Fund for Client Protection (the “Fund”) reimbursed 10 of Cohen’s former clients, all of whom assigned and subrogated their claims against Cohen to the Fund.

In January 2011, the trustee filed an intermediate account with the Surrogate’s Court. The trustee named as an interested party the Nassau County Attorney’s Crime Victims Project, which represented Cohen’s former clients in their claims against him. The County Attorney’s Office represented the interests of the former clients before the Lawyers Fund became involved, and it continued to represent one client who did not seek reimbursement from the Fund.

Both the Fund and the Nassau County Attorney filed objections to the account. The Fund, for its part, maintained that it had an interest in the accounting because of open questions on whether particular estate assets (including an annuity) were part of the trust or owned by Cohen separately.

Wendy H. Sheinberg, Esq., the guardian ad litem for Cohen’s two minor children, moved, inter alia, to amend the petition and account to strike the Nassau County Attorney and the Fund as interested parties, and to dismiss their objections to the account.

The Court began its analysis by noting that the statutory definition of “person interested” specifically excludes creditors. Indeed, SCPA § 103(39) provides that “[a] creditor shall not be deemed a person interested.” The Court then reviewed the cases relied upon by the Fund and the County Attorney, determining them to be distinguishable from the case at bar. Instead, the Court relied upon Matter of Lainez, 79 AD2d 78 (2d Dept 1981), in which the Appellate Division, Second Department, held that a creditor of a beneficiary who is still alive is not a proper party to an account in which the beneficiary has an interest.

The Court also rejected the agencies’ argument that affording them “interested person” status “would be a more efficient way for them to uncover information about Cohen’s assets than if they had to use other discovery methods.” However laudable the goal of efficiency, the Court explained, it “does not give rise to a privilege, right, or status which would otherwise be unavailable.”

Accordingly, the Court determined that as mere potential creditors of a living trust beneficiary, the Fund and the Nassau County Attorney were not persons interested in the decedent’s estate or the accounting. It therefore granted to guardian ad litem’s motion.

The Surrogate’s decision does not leave the two agencies without a remedy, however. The Surrogate’s dismissal of the agencies’ objections was explicitly made without prejudice to their commencing a proceeding pursuant to Executive Law §632-a (6) – the so-called “Son of Sam” law – and seeking the issuance of a preliminary injunction restraining the payment of trust principal to Cohen upon the termination of the trust. The Surrogate also directed that no payments from the trust be made to Cohen for 30 days upon its termination (presumably to give the agencies the opportunity to make an application under the Son of Sam law).

Provision in Pre-Nuptial Agreement to Create Trust for Children is Enforceable

John (Jack) Barnosky — Thu, 01 Mar 2012 09:56:19 -0500

The Pre-Nuptial Agreement entered into by decedent provided that on his death, 70% of the value of his gross estate would be left to trusts to be established for his children “upon such terms and conditions as husband shall specify in his Last Will and Testament.” He died a number of years later at a young age as a result of an accident, leaving two infant children. He died without a Will.

The Westchester County Surrogate’s Court in Matter of Bruan, 2012 NY Slip Op 22020 decided on January 26, 2012, granted an application to permit payment from the Estate to a proposed inter vivos trust to be created for the children despite the lack of specificity in the Pre-Nuptial Agreement as to the terms of the Trust. In what appears to have been an uncontested application, the Court was asked to approve the transfer of funds to two proposed irrevocable trusts for each of the infant children, each of which provided the Trustees with full discretion to pay or apply income or principal for the benefit of the particular child with payments of principal at ages 25, 30 and 35. The beneficiaries were granted a Power of Appointment, and in default the remainder is payable to his or her descendants and if none, to the surviving sibling. Citing Matter of Topping, 36 Misc 2d 991 (Sur Ct, Suffolk County 1962), the Court stated that “no particular words are required in order to create a trust. What matters is that decedent’s intent to create a trust relationship is established” (Matter of Bruan at *3). The Court found that the agreement clearly set forth three of the necessary elements of a trust: (1) designation of beneficiaries; (2) identification of trustees; and (3) the subject matter of the trust.

The Court, however, noted that the proposed inter vivos trust contained clauses which the Court believed would not be enforceable had the decedent created them under a will. These included an exoneration of the fiduciary under certain circumstances (not permitted in a will under EPTL §11-1.7); Waiver of Court approval for resignation (SCPA §715); waiver of the duty to account; and a prohibition from removing Trust assets from New York (SCPA §710(4)).

The Court granted the application to fund the Trust subject to the revisions noted.

Unlawful Marriages and the Right of Election

Robert Harper — Wed, 15 Feb 2012 20:30:01 -0500

Under New York law, a decedent is prohibited from disinheriting his or her surviving spouse (see Margaret Valentine Turano, Practice Commentaries: EPTL § 5-1.1-A [1999 ed.]). Consistent with that prohibition, the laws of this state provide that a decedent’s surviving spouse has a personal right of election to take a portion of the decedent’s estate, whether or not the decedent provides for the spouse in his or her last will and testament (see EPTL § 5-1.1-A). Predictably, the right of election has given rise to extensive litigation, as evidenced by Suffolk County Surrogate John M. Czygier, Jr.’s recent decision in Matter of Newman (see Matter of Newman, 883 P 2007/A, NYLJ 1202520804987 [Sur Ct, Suffolk County Nov. 1, 2011]). As discussed below, Newman is noteworthy because it addresses the extent to which a judicial determination that the alleged surviving spouse’s marriage to the decedent was unlawful will affect the spouse’s right to elect against the decedent’s estate.

EPTL § 5-1.1-A provides that the surviving spouse of a decedent who dies on or after September 1, 1992, has a personal right to elect against the decedent’s estate (see EPTL § 5-1.1-A), unless it is established that the marriage upon which the surviving spouse relies was incestuous, bigamous, or a prohibited remarriage under the Domestic Relations Law (see Newman, supra). The financial consequences of a surviving spouse asserting elective share rights can be substantial, as the pecuniary value of the elective share is equal to “the greater of (i) fifty thousand dollars or, if the capital value of the [decedent’s] net estate is less than fifty thousand dollars, such capital value, or (ii) one third of the net estate” (see EPTL § 5-1.1-A).

In Newman, the decedent’s alleged surviving spouse, Kenneth Newman (“Kenneth”), sought to exercise his elective share rights against the decedent’s estate (see Newman, supra). After the decedent’s will was admitted to probate, the fiduciary of her estate commenced a proceeding to determine the validity of Kenneth’s election against the estate (see id.). Kenneth died before the matter was resolved, and the executor of the decedent’s estate ultimately moved for summary judgment concerning Kenneth’s notice of election (see id.).

Surrogate Czygier held that Kenneth’s notice of election was invalid, as his marriage to the decedent was unlawful (see id.). In reaching that conclusion, the Surrogate found that, at the time he allegedly married the decedent, Kenneth had not yet divorced (and, thus, was still married to) his first wife (see id.). Absent evidence that Kenneth and the decedent “remarried” after Kenneth divorced his first wife, the executor of the decedent’s estate presented sufficient evidence to rebut the presumption that Kenneth’s “second marriage [was] valid and that the prior marriage was dissolved by death, divorce, or annulment” (see id.). Accordingly, as Kenneth’s marriage to the decedent was unlawful, his notice of election was void and unenforceable (see id.).

In sum, while a surviving spouse generally has a right to elect against a decedent’s estate, that right is not absolute (see Matter of Berk, 71 AD3d 883 [2d Dep’t 2010]). To the extent that the surviving spouse’s marriage to the decedent is unlawful, the survivor will not receive his or her elective share.

Court Awards Compensatory and Punitive Damages, and Attorney Fees, for Fraud in Probating Will

John Morken — Fri, 13 Jan 2012 10:50:57 -0500

Stacey Castor (“Stacey”) made national news in 2007, arising from the 2005 murder of her husband, David Castor, Sr., (“Decedent’) as well as the attempted murder of her own daughter. Stacey was convicted of the murder. Having apparently also murdered a prior husband, Stacey became known as the “Black Widow.”

The Castor case recently moved from the criminal to a civil forum, in the form of a lawsuit brought by the son of the Decedent, David Castor, Jr. (“David” or “Plaintiff”), against Stacey and Lynn and Paul Pulaski ("Pulaskis”). David brought the suit in Supreme Court, Onondaga County, seeking recovery from the Pulaskis and from Stacey for fraud and conspiracy surrounding the probate of the Last Will and Testament of the Decedent. After the death of Decedent, Stacey had convinced the Pulaskis to sign their names as witnesses to a false will, benefiting her. The forged Will left Decedent’s estate to Stacey, and was considered in the criminal prosecution of Stacey as a prime motive for the murder of her husband.

The Supreme Court, Onondaga County handed down its decision on December 14, 2011.

During the course of the trial, the Pulaskis had testified that they had been duped by Stacey, and that their motives were good. Lynn Pulaski testified that Stacey had been her best friend. She had felt terrible because of what she had then thought was the suicide of Stacey’s husband, and she wanted to help Stacey out settling the Decedent’s estate.

The Supreme Court Justice (Paris, J.) was not buying it, concluding that,

[b]ased on the evidence and all the pleadings that make up the record of this particular case, including their testimony, it is obvious that Defendants Pulaski were not innocent pawns. They knew what they were doing was wrong and bore false witness to both the Will and Attestation Clause without any hesitancy or reservation. Thereafter, they executed the Attesting Witness Affidavits that they also knew were false. From the record, it is clear that they kept these falsehoods from the Surrogate’s Court and Plaintiff to his detriment throughout the estate proceedings. Defendants Pulaski only ‘came clean’ when the District Attorney’s investigators came knocking on their door and they were given immunity in return for their cooperation and testimony in the criminal prosecution of Co-Defendant Stacey Castor.

The Court continued:

[w]hile the genesis of this action is the heinous crime committed by Defendant Stacey Castor, Defendants Pulaski compounded the crime through their admitted dishonesty… Plaintiff was contesting the purported Last Will and Testament of his father, David W. Castor, Sr., being offered for probate by Defendant Stacey Castor. He withdrew his objections, as he credibly testified, in the face of Defendant Pulaskis’ subsequent execution of the Attesting Witness Affidavits… Defendants Pulaski admitted that they signed in 2005 as witnesses to Decedent’s Will which was dated 2003. Their reaffirmance of this falsehood by signing the Attesting Witness Affidavits, not only harmed Plaintiff, but also subjected the Surrogate’s Court to needless and unwarranted proceedings, thereby detracting from the orderly administration of that Court’s normal, proper and legitimate proceedings.

The Supreme Court went on to find that all three Defendants, the Pulaskis and Stacey, were jointly and severally liable to Plaintiff. The Court assessed both compensatory and punitive damages against all the Defendants, and not just against Stacey, the murderer. As to the Pulaskis, the Court noted that their actions had “compelled Plaintiff to withdraw his objections to the probate of the Will and hoodwinked and deceived the Surrogate’s Court into probating a fraudulent instrument.” Their conduct “was so repugnant and reprehensible so as to satisfy the threshold of moral culpability necessary to allow the imposition of punitive damages."

Finally, in an interesting and significant further holding, the Court determined that the Plaintiff was entitled to the recovery of his attorney fees against the Defendants, including the Pulaskis.

Issues of Undue Influence

Ilene Cooper — Thu, 29 Dec 2011 09:27:34 -0500

Undue influence is an issue commonly associated with Surrogate’s Court proceedings. Indeed, it is often the linchpin to the outcome of a matter, and as such, relevant to its strategy. This is most pointedly revealed by opinions rendered by the Surrogates of New York and Kings County this year, in which the issue of undue influence played a primary role in connection with a contested probate proceeding.

In In re Moles, N.Y.L.J., Apr. 18, 2011, p. 23 (Sur Ct, New York County), the preliminary executors of the estate moved for summary judgment dismissing the objections of the decedent’s nephew, who was the beneficiary of a prior will executed thirty years earlier than the propounded instrument. The objections alleged, inter alia, that the instrument was not duly executed, and that the instrument was procured by the fraud and undue influence of the decedent’s long-time companion, who was the sole beneficiary of the estate, and the named executor along with the attorney-draftsperson.

The undisputed record revealed that the decedent had a history of alcohol abuse for which she was hospitalized and later rehabilitated. Upon completion of her rehabilitation, she returned to New York City where she retained the services of a personal aide whom resided with her until her death twenty years later. Over the course of her employ, there was no dispute that the decedent and her aide became inseparable, spending every day together, and traveling domestically and overseas. Further, there was no dispute that the decedent was capable of making financial and personal decisions regarding her investments and health care.

The decedent’s treating physician testified that she always found the decedent fully responsive and rational. This was substantiated as well by the attorney-draftsperson of the instrument, who stated that he found the decedent alert, coherent and able to convey detailed information regarding her life situation and family.

Notably, the will execution was videotaped and supervised by the draftsperson’s colleague.

In granting the proponents summary relief, the court rejected the notion that the decedent’s early alcoholism impaired her capacity to execute a will, as well as the testimony of the videographer relied upon by the objectant, who testified that the decedent had difficulty identifying the President of the United States. The court held that this evidence paled in light of the reports and testimony of the professionals who treated and worked with the decedent during the period surrounding the execution of the instrument, all of which indicated that she possessed the minimal capacity required to make a valid Will.

As to the issue of undue influence, the court concluded that the objectant had failed to submit any evidence that the decedent’s aide had compelled or constrained the decedent to do anything against her free will. In fact, the objectant admitted that he saw the decedent at most one to two times a year, and that her other family members rarely visited her.

The court found it significant that the attorney-draftsperson of the instrument testified that the provisions of the Will were derived from instructions given to him by the decedent with no involvement of the decedent’s aide. To this extent, the court opined that the lack of involvement by the proponent in a will’s drafting and execution is inconsistent with any inference of undue influence, even where the disinherited party is a close family member. Further, the court held that even assuming the existence of a confidential relationship between the proponent and the decedent, it was counterbalanced by the evidence of the strong affection between the decedent and her aide during their twenty year relationship, the decedent’s expressed desire to leave her aide her entire estate, and her aide’s lack of involvement in the drafting of the Will.

Finally, the court concluded that the objectant had failed to produce a modicum of proof that anyone induced the decedent to execute her Will based upon a false statement.

In comparison to the holding in In re Moles, the court in In re Carter, N.Y.L.J., Apr. 18, 2011, p. 25 (Sur Ct, Kings County), found that the inference of undue influence required that the propounded instrument be denied probate. The facts of the case are in stark contrast to those in Moles and substantiate the differing opinions.

In Carter, the propounded instrument left the decedent’s entire estate, but for 25% percent of any cash due and owing to the decedent’s sole surviving heir, her sister, to a complete stranger (Frazier), who was also named the executor,. The instrument also directed that in the event the decedent’s sister should be admitted to a nursing home, her share should pass instead to Frazier, and that Frazier pay an amount, not to exceed 11 % of the residuary estate, to charities of his choice.

The record revealed that Frazier was 40 years the decedent’s junior, was not related to the decedent, yet, was her self-described caretaker, and that he was an instrumental force behind the execution of the propounded instrument. The court held that, under these circumstances, as well as events described in its own files and through the testimony of Frazier, an inference of undue influence existed requiring a hearing. Notably, the court found that Frazier had been previously appointed as fiduciary in a number of other estates of women significantly older than him, and with whom he had no relationship, that were strikingly similar to the factual situation involving this decedent.

Based on the testimony and evidence adduced at the hearing, the court concluded that Frazier had engaged in a systematic course to take over the personal and financial affairs of the decedent, whom he knew had been diagnosed with dementia, much as he did in the case of countless other elderly and frail women to whom he ingratiated himself. He moved into her home, put his name on her bank accounts, monitored her telephone calls, put her under surveillance and held her health care proxy. Significantly, the record also disclosed that in 2006, when the decedent was overtly suffering mentally, and when no attorney would draft a Will for her, he allegedly acceded to her insistence upon executing a new Will by retyping a prior Will of the decedent, with the decedent’s handwritten changes, and taking the decedent to her doctor’s office to have it signed and witnessed.

At the conclusion of the hearing, the court concluded, inter alia, that Frazier’s testimony gave rise to a strong inference of undue influence, based in particular, upon his complete insinuation into the decedent’s life and financial affairs, the decedent’s dependence upon him for her basic needs, and his involvement in the preparation and execution of the instrument which made him the primary recipient of her estate. The court held that Frazier offered nothing to rebut this proof, but rather buttressed the result that the Will of the decedent was the product of his own decision-making, and control over its preparation and execution.

Accordingly, probate was denied.

Appellate Division Decides Case Of First Impression Regarding Joint Tenancy Issue

Eric Penzer — Wed, 30 Nov 2011 21:22:46 -0500

In Trotta v. Ollivier, the Appellate Division, Second Department, decided an issue of first impression in any New York State appellate court, to wit, whether the estate of a joint tenant may sue a surviving joint tenant to recover one-half of payments made by the decedent for the purchase and upkeep of property. The court answered this question in the negative.

The facts of the case, as alleged in the complaint, were not particularly remarkable. In 1992, the decedent, Susan Leone, and the defendant, Charles Ollivier, purchased real property as joint tenants with the right of survivorship. Thereafter, they lived together for a period of time as an unmarried couple. From her own funds, Leone allegedly paid $90,000 toward the purchase price, a construction loan, and other closing costs and expenses, and thereafter paid $102,000 for the mortgage, $20,000 for property insurance, $11,000 for repairs, $2,500 for utilities, and $1,000 for replacement appliances. In total, Leone allegedly expended $226,500 from her own funds in connection with the property. Allegedly, Ollivier did not contribute to the purchase and carrying charges of the property or, if he did, his contributions were not equal to those of Leone. At no time did either Leone or Ollivier seek a partition of the property.

Leone died unexpectedly in 2008. Subsequent to her death, the plaintiff, the executor of Leone’s estate, made mortgage and other payments on the property totaling $7,500.

The executor commenced an action against Ollivier in Supreme Court alleging unjust enrichment and seeking a judgment reimbursing the estate for one-half of the purchase price of the property and the carrying charges of the property, and full reimbursement of the $7,500 in carrying charges paid by the estate.

The trial court granted Ollivier’s pre-answer motion to dismiss the complaint for failure to state a cause of action, holding that the estate’s reimbursement claim did not survive Leone’s death, and that RPAPL 1201 -- discussed below -- was inapplicable. The Appellate Division reversed, agreeing that the complaint failed to state a cause of action as to any of the expenses paid by Leone prior to her death, but holding that the estate stated an unjust enrichment claim against Ollivier for reimbursement of the $7,500 paid post-death.

The court began its analysis by noting that Leone, while she was alive, could have sought to partition the property, effectively severing her joint tenancy with Ollivier, and in that regard could have sought an equitable adjustment of the interests she and Ollivier held in the property. She never did so. The court further noted that “Leone, during her lifetime, was free to manage her finances and spend her money as she saw fit, even if, with the benefit of hindsight, her decision to purchase the subject property and hold title with Ollivier as a joint tenant, and to continue to pay its ongoing expenses after Ollivier moved to another address, inured to the financial benefit of Ollivier.” Thus, according to the court, the estate had no claim for unjust enrichment for reimbursement of Leone’s pre-mortem expenditures.

The court further rejected plaintiff’s argument that RPAPL 1201 provided the basis for a claim for reimbursement. That statute provides that “[a] joint tenant or a tenant in common of real property, or his executor or administrator, may maintain an action to recover his just proportion against his co-tenant who has received more than his own just proportion, or against his executor or administrator.” Despite a “paucity” of case law interpreting the statute, the court determined that RPAPL 1201 vests joint tenants and tenants in common, or their estates, with the right to recover monies “received” by a co-tenant that exceed his or her proportionate share; it does not extend the right of recovery to expenses “paid” by a tenant beyond his or her equitable share means.

Accordingly, the court held that no claim existed against Ollivier with respect to pre-death payments made by Leone.

The court reached a different determination with respect to the $7,500 the estate paid toward the property’s expenses after Leone’s death. When those payments were made, ownership of the property had already passed to Ollivier by operation of law. The estate, according to the court, had a valid claim for unjust enrichment in connection with those payments, as it would be “against equity and good conscience to permit Ollivier to retain the value of those payments.”

Was it a Convenience Account?

Jaclene D'Agostino — Fri, 21 Oct 2011 12:12:22 -0500

A convenience account is exactly as it sounds – an account on which the holder adds someone else’s name for purposes of convenience only, i.e., check writing, bill paying, transfers, and withdrawals. It is a frequently litigated topic , as the issue often arises as to whether a joint account had really been intended as such, or whether it was created merely for convenience. If it is the latter, then all of the funds contained in the account will pass to the estate of the initial account holder.

It is generally recognized that Section 675 of the Banking Law creates a presumption that a right of survivorship is intended for each named account holder, but some courts have held that this presumption only arises where the signature card on the account contains the requisite survivorship language (see e.g. Matter of Coon, 148 AD2d 906 [3d Dept 1989]; Matter of Seidel, 134 AD2d 879 [4th Dept 1987]; Matter of Ancell, 5/2/2002 NYLJ 28 [col 4] [Sur Ct, Westchester County]; cf. Sutton v Bank of New York , 250 AD2d 447 [1st Dept 1998]). Regardless, it is the burden of the person alleging that such an account had been for convenience to come forth with sufficient evidence to rebut any existing presumption, and establish that a convenience account had been intended (see Viggiano v Viggiano, 136 AD2d 640 [2d Dept 1988]). In deciding the issue, courts typically look to the following factors:

Whether the decedent was the sole depositor to the account;
Whether the creation of a survivorship interest would deviate from the decedent’s testamentary plan;
Whether the account was used exclusively by the decedent during his lifetime;
Whether the decedent retained the right to withdraw the proceeds; and
The conduct of the surviving joint tenant (In re Zorskas, 20 Misc 3d 1110[A], [Sur Ct, Nassau County 2008]).

These considerations will ultimately determine the outcome of Estate of Sanabria, 2011 NY Slip Op 51802(U), a recent case emanating from Bronx County. Surrogate Holzman issued an initial decision in Sanabria last week, granting the temporary administrator’s application for a preliminary injunction against a daughter of the decedent, prohibiting her from withdrawing funds from a bank account that she had held jointly with the decedent during his lifetime. The temporary administrator, who also happened to be a son of the decedent, asserted that the joint account had been for convenience only. The daughter, on the other hand, claimed that the subject account had been held jointly with right of survivorship. Her position was not supported by the signature card, which lacked survivorship language and listed the decedent “or” the daughter as the account holders. Therefore, even if the account were not a convenience account but merely a co-tenancy, principles of moiety would entitle the daughter to no more than half of the funds contained therein (see Estate of Hamburg, 151 Misc 2d 1034 [Sur Ct, Bronx County 1991]).

On the return date, counsel for the petitioner informed the court that the daughter had withdrawn approximately $358,000 from the joint account, which was then closed. Accordingly, he requested broader relief enjoining the daughter from transferring or disposing of all funds that had been in the joint account, regardless of their current location. The Court granted this relief because the temporary administrator met the requisite elements for preliminary relief, demonstrating (1) a likelihood of success on the merits (by virtue of the signature card); (2) irreparable harm to the estate if the preliminary injunction were not granted; and (3) the balance of equities of his favor (the daughter removed the funds from the account after being on notice of the estate’s claim against her). Notably, the Court’s consideration of the signature card as probative of a likelihood of success on the merits indicates that it is following the line of cases holding survivorship language on the card to be determinative as to whether a presumption of a joint tenancy will arise (see supra).

If, after a hearing, the Court decides that the account was in fact for convenience only, the daughter will be liable for the entire balance of the account as of the date of the decedent’s death.

Court Decides Issue Of Standing To Participate In Cy Pres Proceeding

Eric Penzer — Fri, 23 Sep 2011 10:08:33 -0500

In a recent decision in the Matter of Lally, the Schenectady County Surrogate’s Court decided an issue of standing on a set of particularly interesting facts.

The case involved a charitable trust agreement that directed that “St. Clare’s Hospital of Schenectady, New York Foundation Inc. Schenectady, New York” (along with various other charitable beneficiaries) receive a portion of the remainder of the subject trusts.

According to the petitioner, St. Clare’s Hospital of Schenectady, N.Y. Foundation, Inc. (the “Foundation”) is a not-for-profit corporation established to support and assist St. Clare’s Hospital of Schenectady (the “Hospital”) in expanding and developing its services to the community. However, in 2008, the New York State “Berger Commission” mandated that the Hospital close its doors. Allegedly, the commission required the Hospital to surrender its license to operate and to execute an Asset Transfer Agreement with Ellis Hospital (“Ellis”), which assumed the sole responsibility of providing hospital and other healthcare services previously provided by the Hospital, and is the sole remaining hospital in Schenectady County. While the Foundation remains in existence as a not-for-profit corporation, and holds significant assets, it no longer supports or assists the inoperative Hospital.

The corporate trustee of the subject trusts, Trustco Bank, brought a cy pres proceeding in the Surrogate’s Court, to determine whether the Hospital’s relinquishment of its license to operate renders the administration of the subject trusts according to their literal terms impractical or impossible. Ellis filed a Notice of Appearance in the proceeding. The Foundation moved to “reject” the Notice of Appearance, in essence asking that the court rule that Ellis had no standing to participate in the proceeding. The Attorney General filed papers in support of the Foundation’s motion, and Ellis, naturally, opposed it. The trustee took no position.

By way of background, courts generally entertain cy pres proceedings when the intended recipients of a charitable donation can no longer be identified. In such cases, courts are authorized to release funds for purposes as close as possible to the wishes of the donors. As one court explained,

the cy pres doctrine takes its name from the Norman French expression, cy pres comme possible, which means “as near as possible.” The doctrine originated to save testamentary charitable gifts that would otherwise fail. Under cy pres, if the testator had a general charitable intent, the court will look for an alternate recipient that will best serve the gift’s original purpose.

(Airline Ticket Comm’n. Antitrust Litig. Travel Network, Ltd. v United Air Lines,

Inc., 307 F3d 679, 682 [8th Cir 2002]).

The court first addressed -- and rejected -- various procedural arguments. First, it rejected the Attorney General’s argument that it was premature to determine Ellis’ standing prior to the court deciding whether it would exercise its cy pres power in the first place. Second, it rejected the argument that the court should not reach the issue of standing because Ellis neither initiated the proceeding nor was suing to enforce its claim to the subject charitable gift. Having rejected those procedural arguments, the court went on to address the merits of the motion, i.e., the issue of Ellis’ standing to participate in the proceeding.

The parties agreed that the court should apply the standing rule enunciated by the Court of Appeals in Alco Gravure v. The Knapp Foundation, 64 NY2d 458 (1985). That case was a declaratory judgment action brought by corporate plaintiffs whose employees were the intended beneficiaries of a charitable foundation. In deciding the issue of the plaintiffs’ standing to maintain the action, the Court held that one who is merely a possible beneficiary of a charitable trust, or a member of a class of possible beneficiaries, is not entitled to sue for enforcement of the trust. Rather, the Attorney General has the statutory power and duty to represent the beneficiaries of any disposition for charitable purposes. However, the Court also recognized an exception to the general rule, where a particular group of people has a special interest in funds held for a charitable purpose, as when they are entitled to a preference in the distribution of such funds and the class of potential beneficiaries is sharply defined and limited in number (see id. at 465).

The Surrogate noted that the facts in Alco Gravure differed from the facts of the case before it because, first, Alco Gravure was not a cy pres proceeding; second, the plaintiffs in Alco Gravure were members of a named class of beneficiaries (i.e., persons employed by the defendant corporation); and, third, the issue in Alco Gravure pertained to the plaintiffs’ standing to sue, not standing to appear and participate as an intervenor as in this case. Nevertheless, the court stated that it would apply the rules enunciated in Alco Gravure, there being no other authority providing any superior guidance.

Applying those rules, the court rejected the argument advanced by the Attorney General and the Foundation that Ellis is merely one of an undefined class of hundreds of potential beneficiaries of a cy pres-directed distribution of the trust, with no preferred status in a case. Instead the court determined that Ellis had a unique, contractual relationship with the Hospital that set it apart from all other potential charitable beneficiaries, and that therefore it was entitled to a preference in the distribution. The court based its determination on the facts regarding the Berger Commission’s mandate and the Asset Transfer Agreement between the Hospital and Ellis, by which Ellis acquired the Hospital’s assets and assumed its hospital services.

However, the court was careful to emphasize that its ruling should not be interpreted as meaning that in the event it determined to exercise its cy pres power, Ellis would be the likely recipient of the subject charitable disposition. The court’s ruling only provided Ellis with the status of an interested party, with the right to file a responsive pleading, participate in discovery, make motions, and participate during the trial.

Although the importance of the court’s decision in Matter of Lally might not extend much further than the specific facts of that case, it certainly provides further authority for the proposition that the Surrogate’s Courts are, first and foremost, courts of equity.

Revoking Marriages in Article 81 Proceedings

Robert Harper — Thu, 25 Aug 2011 11:27:33 -0500

As the problem of elder abuse has become increasingly prevalent in recent years, so too has the need to protect elders who suffer abuse, whether physical, mental, or financial, at the hands of the individuals to whom they have entrusted their care and affairs (see Campbell v Thomas, 73 AD3d 103, 104 [2d Dept 2010]). Recent case law demonstrates that elderly individuals can fall prey to their much younger caregivers who secretly marry the elderly in the hopes of benefiting from their estates (see id.; Matter of Berk, 71 AD3d 883, 883-86 [2d Dept 2010]; Matter of Kaminester, 26 Misc3d 227, 235-37 [Sur Ct, New York County 2009]). For family members who are aware of such abuse, one solution may be to commence an Article 81 guardianship proceeding and to seek to have the marriage revoked by a guardianship court (see Mental Hygiene Law 81.29).

Under Mental Hygiene Law 81.29, an Article 81 guardianship court “may modify, amend, or revoke . . . any contract [including one involving a marriage] made while the person was incapacitated” (see Mental Hygiene Law 81.29). In this regard, the Appellate Division, Second Department, has held that a marriage may be revoked when the evidence shows that one of the parties to the marriage “was ‘incapable of understanding the nature, effect, and consequences of the marriage’” at the time that it occurred (Matter of Joseph S., 25 AD3d 804, 806 [2d Dept 2006]). The factors that the guardianship court considers in determining whether to revoke a marriage include, among other things, the differences in the purported spouses’ ages; whether the spouses cohabited; whether there was a change in residency; whether the spouses wore wedding rings; and whether there is any evidence of financial exploitation of the incapacitated spouse (see Matter of I.I.R., 21 Misc.3d 1136[A], at *2 [Sup Ct, Nassau County 2008]).

Matter of Carmen R. is instructive (see 15 Misc3d 1116[A], at *1-6 [Sup Ct, Westchester County 2007]). There, the petitioner, the alleged incapacitated person’s daughter and duly appointed Temporary Personal Needs Guardian, made an application for the annulment of her eighty-nine year-old mother’s marriage to her fifty-seven year-old chauffeur (see id.).

At an evidentiary hearing, Westchester County Supreme Court Justice Peter J. Rosato heard testimony from, among others, the alleged incapacitated person’s physician, which established that she suffered from severe dementia, among other ailments, and could not understand any marriage ceremony; from the alleged incapacitated person, which demonstrated that she knew her alleged spouse, but could not remember his last name or any marriage to him; and from the alleged incapacitated person’s daughter, which suggested that the alleged spouse concealed the “marriage” from her, evidenced the fact that the alleged spouse was her mother’s chauffer, not her friend, and flatly contradicted the alleged spouse’s claim that he had lived with the incapacitated person for more than a decade (see id.). Justice Rosato also heard testimony from the alleged spouse which demonstrated that the first time he publicly disclosed the marriage was on an immigration application to have his daughter admitted to the United States from Ecuador; that he had been collecting thousands of dollars in rent from the tenants of property owned by the alleged incapacitated person; and that he had previously been arrested for violating a temporary restraining order that prohibited him from having contact with the alleged incapacitated person (see id.).

Based upon the testimony and other evidence before the court, Justice Rosato granted the petitioner’s application for an annulment of the marriage between her mother and the chauffer (see id.). In doing so, Justice Rosato explained that “[i]t [was] abundantly clear, on the evidence adduced upon the hearing held herein, that the [alleged incapacitated person] did not possess the requisite mental capacity to marry” (id.). Justice Rosato also found that the marriage was a product of fraud arising from the purported spouse’s desire to gain entry into this country for his daughter who was living in Ecuador until after the marriage (see id.). Accordingly, Justice Rosato granted the petitioner’s application to annul the marriage (see id.).

Of course, an annulment in the context of an Article 81 proceeding is only feasible where the relatives of an allegedly incapacitated person are aware of the marriage prior to the person’s death. Where the marriage is concealed until after the person dies, however, other remedies may exist outside the context of Article 81 (see Jaclene D’Agostino, “Appellate Division Cites Equitable Factors In Denying Entitlement To Elective Share”)

Fiduciary Beware: Contested Accounting in the Face of Exoneration Clause Results in Liability for Inter Vivos Trustee

Ilene Cooper — Thu, 11 Aug 2011 08:53:14 -0500

Although exoneration clauses in a testamentary trust will not, as a matter of public policy, absolve a trustee of liability for failure to exercise reasonable care, diligence and prudence (EPTL §11-1.7(a)(1)), there is no comparable statutory provision with respect to exoneration clauses in lifetime trusts. Nevertheless, the court, in Matter of Accounting of Tydings, NYLJ, July 7, 2011, at p. 26 (Sur Ct, Bronx County), found reason, despite the exoneration clause in the inter vivos trust instrument, to hold the trustee liable.

In Tydings, the court had the opportunity to opine on the effect of the exoneration clause in the subject trust, commissions, and the legal fees incurred by the petitioner and objectant. The objectant in the proceeding was the grantor and income beneficiary of the trust, with a discretionary interest in the principal. The ultimate remainderman of the trust was the grantor’s infant son.

With regard to the issue of the exoneration clause, the trust instrument authorized, inter alia, the trustee to retain an original investment for any length of time without liability for such retention, and to act on behalf of the trust and herself or another entity with regard to any transaction in which the trustee and the trust or the other entity had an interest. The trust also provided that the trustee would not be responsible for any loss to the trust unless such loss resulted from bad faith or fraud on the part of the trustee, and that the trustee would not be disqualified from acting because the trustee held an interest in any property or entity in which the trust also held an interest. The court noted that several of the objections raised in the proceeding hinged, inter alia, on the enforceability of this exoneration clause.

To this extent, the court opined that despite the absence of a statute applicable to exoneration clauses contained in lifetime trusts (cf. EPTL 11-1.7(a)(1)), the enforceability of such clauses were nevertheless subject to certain defined limitations. For instance, the court observed that a trustee of a lifetime trust who is guilty of wrongful negligence, impermissible self-dealing, bad faith or reckless indifference to the interests of the beneficiaries will not be shielded from liability by an exoneration clause. Moreover, when an attorney, named as trustee, is the draftsperson of the instrument containing an exoneration clause, the clause limiting the trustee’s liability to bad faith acts is void as against public policy. Further, the court noted that while improper self-dealing will not come under the umbrella of an exoneration clause, the rule of undivided loyalty due from a trustee may be relaxed by appropriate language in the trust instrument which directly or indirectly recognizes the trustee may be in a position of conflict with the trust.

Within this context, the court held that the petitioner would not be liable with respect to an interest-free loan that pre-existed the creation of the trust and that had been transferred into the trust by the grantor. On the other hand, the court found the petitioner liable for interest-free loans made by the trust subsequent to the inception of her stewardship. To this extent, the court concluded that petitioner’s conduct exhibited a complete indifference to the best interests of the objectant, mandating that she be surcharged for the income lost on the loan transactions.

Additionally, the court found that the exoneration clause in the instrument did not bar the objectant from recovering lost profits from the trustee attributable to her use of trust funds, without consideration, to benefit an entity in which she was personally interested.

As to the balance of the objections, the court concluded that the objectant was either estopped from raising the issues, or did not warrant the imposition of a surcharge.

With respect to the issue of commissions, the court opined that while not every surcharge warrants a denial of commissions, when the fiduciary has engaged in conduct evidencing bad faith, a complete indifference to his/her duties and responsibilities, or some act of malfeasance or misfeasance, commissions will be denied. Based on the record, the court found that the petitioner was lax with regard to managing the financial aspects of the trust. Indeed, although the court concluded that the petitioner had not acted in bad faith, it, nevertheless, held, particularly based on the interest-free loans that had been made, that she had exhibited indifference to her duties, and, accordingly, sufficient misfeasance to warrant a denial of commissions. Further, the court denied the petitioner annual commissions on the grounds that she had failed to establish that she had furnished the objectant with an annual statement pursuant to the provisions of SCPA 2309, that the objectant had waived her right to receive the statement, or that there was sufficient income retained by the trust in any particular year from which she could pay herself income commissions.

Finally, with regard to the issue of legal fees, the court held, in the exercise of discretion, that the petitioner and the objectant should each, individually, bear responsibility for their legal fees and expenses. The court observed that while many of the objections to the petitioner’s account had not been sustained, the petitioner could not seek payment of fees from the trust for defending objections for which she was surcharged. Moreover, the court opined that a strong case could be made for holding the petitioner responsible for the expert witness fees incurred by the objectant in proving petitioner’s liability in connection with the transactions for which she was surcharged. On the other hand, the court noted that the objectant vigorously pursued, and caused the petitioner to defend, numerous objections of which she was aware and had approved prior to their occurrence. Accordingly, under all the circumstances, the court determined it would be most equitable to have the petitioner and the objectant to personally satisfy their own legal fees in connection with the proceeding.

Who are the Distributees?

Frank Santoro — Fri, 29 Jul 2011 09:06:45 -0500

Attempting to determine the rightful intestate distributees of decedents in kinship hearings can be interesting. To illustrate, in the most general way, how the process works in Surrogate’s Court, let us take the simple case of Joe, an MTA switchman who never executed a Will, never married, and died at the age of 90, having lived in a modest apartment in Flushing, New York for the last 70 years (except for the years 1944 through 1949 when he served in the armed forces). There is no sign that Joe has any family. What happens to Joe’s $75,000 condominium and $2 million in cash and marketable securities?

Joe’s assets will be administered by the Public Administrator - the Public Administrator will marshal Joe’s assets, pay all debts and administration expenses, and after due diligence, will render an accounting to whatever potential heirs the Public Administrator is able to locate through due diligence and the Attorney General of the State of New York. To get a bit of an idea as to what the Public Administrator does, check out these websites, http://queenscountypa.com/ http://www.nyc.gov/html/kcpa/html/home/home.shtml. (You can also follow the Queens County Public Administrator on twitter if you are interested).

In Joe’s case, the Public Administrator is able to determine through due diligence, e.g., talking to Joe’s neighbors, reviewing Joe’s birth certificate found among Joe’s personal effects, looking at census records, looking at Joe’s draft registration card, and looking at social security records, the identity of Joe’s long deceased mother, and two gentlemen who may be cousins of Joe on his mother’s side (maternal cousins). The Public Administrator is unable to obtain any information about Joe’s father. The Public Administrator has not found any records showing that Joe was married or had any children.

Because Joe’s intestate distributees are unknown, the Public Administrator will request that the Surrogate permit the Public Administrator to pay the assets of Joe’s estate to the Commissioner of Finance for the City of New York (Comptroller of the State of New York for Counties outside of New York City) in the absence of a determination of Joe’s intestate distributees. The Public Administrator would cite to the unknown heirs of Joe’s estate by publication, the two potential maternal cousins, and the Attorney General. If no-one appeared in the accounting proceeding, the assets would be deposited with the Commissioner of Finance and would be subject to being recovered by Joe’s heirs that come forward and prove heirship. If potential heirs appear in the accounting proceeding, there will be a kinship hearing in the context of the accounting proceeding. The kinship hearing in that SCPA § 2222 withdrawal proceeding would proceed in the same manner as a kinship hearing in the accounting proceeding. Those persons claiming to be heirs of Joe and seeking to receive Joe’s assets would be required to prove that they and Joe share a common ancestor and that there are no missing or unknown intestate distributees with an equal or superior right to inherit.

Kinship hearings often involve alleged heirs presenting documentary evidence, such as birth certificates, death certificates, social security applications, mortuary records, probate files, obituaries, baptismal certificates, marriage certificates, decrees of divorce, census records and any other publicly available documents that are useful in demonstrating kinship. The presentation of this documentary evidence will also be accompanied by the testimony of witnesses. In Joe’s case, his birth certificate and his signed social security application indicate that his father is unknown. In Joe’s case, we might also hear from the fellow who lived in the apartment next to Joe, who would testify that he never saw anyone visit Joe, and that he spoke with Joe quite often and that Joe stated that he regretted that he was never married and never had children. The absence of any record of Joe being married or having children (after a thorough search of public records) together with Joe’s neighbor’s testimony, would be highly probative to the issue of whether Joe died with a spouse and issue, as these would be the first people to take in intestacy. This testimony would be admissible over a hearsay objection based on the pedigree exception to hearsay. There are certain presumptions that a person claiming to be an heir can avail themselves of, such as the presumption that a person is deemed to have predeceased the decedent if he would have been 100 years old at the time of decedent’s death. Another oft employed presumption arises by statute, namely, the three-year presumption under SCPA § 2225. In some cases a professional genealogist will assist counsel in attempting to prove heirship, and even scientific evidence, such as DNA evidence, might come into play in a kinship hearing.

Kinship proceedings, aside from telling sometimes compelling narratives of peoples’ lives, can be illuminating from a historical perspective. Census records reveal extended families struggling to make it in their new country in ethnic enclaves, and the chaos of World War II and the devastation of the Holocaust can present special challenges to those attempting to prove kinship to a decedent. With vast public records destroyed and the world having been robbed of the memories of millions of people, evidentiary hurdles may abound. In similar fashion, the legacy of slavery and racial discrimination present challenges when attempting to prove kinship to an African-American decedent.

More Tales from the Crypt: The Right of Sepulcher, Decedent's Intent and Disposition of Human Remains

Robert Harper — Thu, 14 Jul 2011 09:18:18 -0500

Two years ago, in “Tales from the Crypt: Disposing of Human Remains in New York”, I wrote that: “[i]n New York, the disposition of remains is presumptively governed by [Public Health Law ] section 4201; and that “[a]bsent a valid written instrument appointing an agent for that purpose, section 4201 sets forth which individuals shall have priority to make decisions concerning the disposition of remains” (see “Tales from the Crypt: Disposing of Human Remains in New York”). While those statements remain true today, a recent decision by Nassau County Supreme Court Justice Joel K. Asarch addresses the extent to which a decedent’s intent governs the disposition of his remains where surviving family members have expressed conflicting views on the issue and the individual who has priority to make the decision seeks to dispose of the decedent’s remains in a manner that is inconsistent with the decedent’s expressed intentions (see Matter of Grace D., 922 NYS2d 914 [Sup Ct, Nassau County 2011]).

Although “the common-law right of sepulcher gives [a decedent’s] next of kin the absolute right to the immediate possession of a decedent’s body for preservation and burial” (Melfi v M. Sinai Hosp., 64 AD3d 26, 31 [1st Dept 2009]), Public Health Law section 4201 “sets forth a prioritized list of [individuals] who shall presumptively have the right to direct the disposition of a decedent’s remains” (see Maurer v Thibeault, 20 Misc3d 631, 632 [Sup Ct, Cortland County 2008]; Public Health Law § 4201). At the top of the list is an agent appointed in a written instrument that is duly executed in accordance with section 4201 (see Public Health Law § 4201). Absent such a written instrument, the decedent’s surviving spouse, surviving domestic partner, surviving children who are eighteen years of age or older, and surviving siblings who are eighteen years of age or older, among others, in descending order, shall have priority (see id.). No matter who ultimately has priority, however, the individual charged with making a decision concerning the decedent’s final resting place must do so in a manner that is consistent with “the moral and individual beliefs and wishes of the decedent” (id.[c]).

In Matter of Grace D., the decedent’s surviving sister and niece were at odds as to how to dispose of the decedent’s remains (see Grace D., 922 NYS2d at 915-17). On the one hand, the decedent’s sister sought to have the decedent’s remains cremated and transported to her home in Vermont, where the decedent experienced artistic and musical inspiration during his life (see id.). Although she acknowledged that the decedent never expressed any intention to be cremated, the sister explained that, upon her death, she wished to be cremated and to have the decedent’s ashes combined with her cremains (see id.).

On the other hand, the decedent’s niece expressed her desire that the decedent be buried, as he intended, in the Catholic cemetery burial plot that he had purchased for himself thirty-five years before meeting his maker (see id.). The niece testified that the decedent “was a religious man, who served as the Choir Director at a local church for several decades, and expected that he would be buried in the customary garb of a Knight of the Order of the Holy Sepulchre of which he was a member” (see id.).

Noting that the decedent’s Last Will and Testament did not indicate his desire for the disposition of his remains; that there was no duly appointed agent to decide that issue; and that the decedent was survived by two sisters, including the one who sought to have his remains cremated, Justice Asarch found that the sisters would have statutory priority over all other surviving heirs to determine where the decedent’s final resting place would be (see id.). However, Justice Asarch also explained that since the decedent left a clear indication as to his wishes by purchasing a burial plot and paying for its permanent care, the court was bound to respect the decedent’s intentions (see id.). Justice Asarch, therefore, ordered that the decedent’s remains be buried in his cemetery plot, not cremated, as his sister, but not the decedent, wished (see id.).

In sum, a decedent’s testamentary intent is the paramount concern in cases concerning the disposition of human remains. To the extent that the decedent’s wishes can be ascertained, they must be honored by the decedent’s surviving relatives, most especially those who have priority to decide where the decedent’s final resting place will be.

"After Acknowledged Children" Denied Inheritance Rights

John (Jack) Barnosky — Thu, 30 Jun 2011 08:42:54 -0500

Although acknowledging that the Appellants’ position was “sympathetic”, on June 14, 2011, the Appellate Division, Second Department affirmed the decision of Surrogate Riordan of Nassau County, denying two children of the decedent the rights accorded after-born children under EPTL 5-3.2. (Matter of Roy Gilmore Sr., 2011 NY Slip Op 05272 [2d Dept 2011]) .

Mr. Gilmore executed a Will in June 1996. He left his entire estate to a daughter, Angela, although he was survived by eleven children.

The Appellants were born prior to the execution of the Will, but the Decedent did not know that the they were his biological children until after the Will was executed in 1996. The proof showed that Decedent, in 2006, learned that Appellants were his children and, in fact, introduced them “as his two children whom he had recently learned of.”

A parent in New York, of course, is under no obligation to leave any part of his estate to his children. However, to address situations where a child is inadvertently left out of a parent’s will because such child was born after the Will’s execution, the Legislature enacted EPTL 5-3.2 which provides that in such a case, after-born children will share with the children provided for in the Will.

Here the children were not after-born, but it was contended that Decedent’s lack of knowledge of the two children who were born prior to the Will, prevented him from benefitting them in his Will. Appellants argued that children born prior to execution of a Will, but only later gaining status as children of a decedent by adoption, are included as children, thus evincing a policy in New York allowing pre-borns to take in some situations. The Court declined to treat these “after acknowledged” children in the same manner as “after adopted” children, relying on the literal language of the statute and saying that if rights are to be given to such so-called “after known children,” which some states have done, this is a matter for the Legislature, not the Courts.

19 Year-Old Instrument Denied Probate as Ancient Document

Jaclene D'Agostino — Tue, 07 Jun 2011 10:11:13 -0500

Generally, the testimony of at least one attesting witness is required to probate a will. But practitioners will sometimes face a situation where all of the witnesses to a propounded instrument are unavailable or cannot be located to testify in support of the document. In such cases, the common law “ancient document rule” may be relied upon to probate the instrument if it is of a certain age.

New York Courts have been utilizing the ancient document rule as a practical basis for probate since the early nineteenth century (see In re Hehn’s Will, 6 Misc 2d 801 [Sur Ct, Nassau County 1957]). But in the recent case of Matter of Santoro, 2011 NY Slip Op 50920(U), Surrogate McCarty of Nassau County addressed the question of whether the rule can be relied upon where the propounded instrument is only nineteen years old; he held that it cannot.

The basis for the ancient document rule has been explained as twofold: (1) “after a long lapse of time, ordinary testimonial evidence from those who saw the document’s execution or knew the style of handwriting or heard the party admit the execution is practically unavailable, and a necessity always exists for resorting to circumstantial evidence”; and (2) “the circumstance of age-or long existence-of the document, together with its place of custody, its unsuspicious appearance, and perhaps other circumstances, suffice, in combination, as evidence to be submitted to the jury” (In re Hehn’s Will, 6 Misc 2d 801 [Sur Ct, Nassau County 1957], quoting VII Wigmore on Evidence [Third Ed.] §2137]).

In his analysis, Surrogate McCarty did not raise any basis to dispute the genuineness of the instrument, and noted that the application was uncontested. However, he explained that the common law ancient document rule requires the propounded instrument to be at least thirty years old, although some liberal courts have adopted the federal twenty-year rule. Application of the rule to a nineteen-year old instrument was unprecedented. Accordingly, it was held that the instrument could not be probated as an ancient document.

Despite its failure to qualify as an ancient document, the Court explained a statutory basis upon which the instrument may be probated absent the testimony of any witnesses. SCPA §1405[4] provides that the will may be admitted to probate based solely upon “the handwriting of the testator and of at least one of the attesting witnesses and such other facts as would be sufficient to prove the will”. To satisfy this requirement, the Surrogate noted that the handwriting of the predeceased attorney draftsman could be obtained from his original will that was on file with the Court, and proved based upon an affidavit from a handwriting expert that the signature on the propounded instrument was written by the same person who executed his will. Similarly, he stated that the Court would be satisfied with the genuineness of the subject decedent’s signature based upon an affidavit from one of her children or other relatives. Thus, it appears that the propounded instrument will ultimately be admitted to probate upon the Court’s receipt of the requisite testimony.

The decision in Matter of Santoro serves as a reminder to practitioners that there may often be more than one approach to probating an instrument absent the requisite support from witnesses, and perhaps introduces a method for doing so that may not have otherwise been considered. If a predeceased witness died testate, his will is (in most cases) a public record from which a handwriting expert should be able to testify in satisfaction of SCPA §1405[4]. Nonetheless, contested proceedings of this kind are unlikely to be so simple, especially if the surviving witness were to testify against the instrument (see SCPA §1405[3]).

A View from the Appellate Bench

Ilene Cooper — Tue, 17 May 2011 09:49:03 -0500

Over the past several months, the Appellate courts have been actively engaged in determining issues pertinent to the field of trusts and estates and providing guidance to the Surrogate’s Court practitioner. The following is a synopsis of but a few of the decisions rendered.

Discovery Proceedings

In Matter of Delgatto, 2011 NY Slip Op 02667, the Appellate Division, Second Department affirmed an order of the Surrogate’s Court, Kings County (Johnson, S.), which denied the petitioner’s motion for summary judgment in a proceeding pursuant to SCPA 2103 to recover real property. The petitioner, who was the administrator cta of the estate, alleged that the decedent transferred the subject property to a revocable trust for the benefit of his caregiver, as a result of undue influence. The Court noted that several of the exhibits submitted by the petitioner were not in admissible form, i.e. unsigned and unattested transcripts, and thus could not be utilized in support of the motion. Further, the Court opined that the admissible evidence submitted by the petitioner failed to establish the petitioner’s prima facie entitlement to judgment as a matter of law.

The Elective Share

On April 26, 2011, the Appellate Division, Second Department, affirmed the order of the Surrogate’s Court, Kings County (Johnson, S.), which granted the petitioner’s motion for summary judgment determining her right to an elective share of the decedent’s estate. In Matter of Atiram, 2011 NY Slip Op 03593, the Court found that the petitioner had established that she married the decedent in 1952 and that they remained legally married until the date of the decedent’s death. The Court concluded that the objectant had failed to raise any triable issue of fact as to whether the petitioner was disqualified on the grounds of abandonment, or equitably estopped from taking an elective share.

Compulsory Accounting

In Matter of Faggen, 2011 NY Slip Op 01413, the Appellate Division, First Department affirmed an order of the Surrogate’s Court, New York Count (Webber, S.), which dismissed a petition for a compulsory accounting by the co-fiduciaries of the estate of the decedent. The record revealed that the decedent was the fiduciary of the estate of her late husband, who was the executor of the estate which was the subject of the proceeding. The Court held that a compulsory proceeding by fiduciaries thrice removed from the subject estate was not authorized by the provisions of SCPA 2207.

Proceeding Against a Fiduciary to Recover Property

Before the Appellate Division, Third Department in Matter of Curtis, 2011 NY Slip Op 027773, was an appeal from an order and decree of the Surrogate’s Court, Rensselaer County (Hummel, S.), which partially granted the petitioner’s application to compel the delivery of property from the fiduciary, and from a decree of that court which judicially settled the fiduciary’s accounting. The parties were the decedent’s daughters and co-executors of her estate. Prior to the decedent’s death, the decedent moved in with one of her daughters, who became her attorney-in-fact. Acting in this capacity, the daughter transferred assets of the decedent into her name.

After the decedent’s death, the decedent’s other daughter compelled her sister to account as attorney-in-fact and as co-executor of the estate. Both accountings were submitted and objections were filed. At the bench trial, the petitioner only pursued objections to the respondent’s accounting as attorney-in-fact, alleging that the transfers of assets by the decedent were the result of self -dealing and breach of fiduciary duty. The Surrogate’s Court disagreed, concluding that the respondent’s actions were undertaken with the express consent of the decedent, who was found competent at the time. The Appellate Division affirmed.

The Court held that while there was a presumption that the services provided by respondent’s husband in connection with the sale of certain realty were gratuitous in nature, that presumption was sufficiently rebutted by the testimony of the respondent and her husband that the decedent agreed to pay for her son-in-law's services. To this extent, the Court deferred to the Surrogate’s assessment of the witnesses’ credibility, and expressly noted that the petitioner put forth no evidence to contradict the evidence presented.

Moreover, the Court found that the transfer of the decedent’s investment account to the respondent, and respondent’s inclusion as a mortgagee upon the sale of the decedent’s home constituted valid gifts, albeit made by the respondent as the decedent’s attorney-in-fact. The Court relied on the language of the power of attorney which authorized the making of the gifts in issue, as well as the testimony of the respondent who stated that the decedent was present when the subject transactions occurred.

Surrogate: Dog Groups Barking Up The Wrong Tree

Eric Penzer — Mon, 09 May 2011 10:04:51 -0500

This is my third “dog pun” post in as many years.

If you’ve read this blog since its inception, or have merely been sniffing through the archives, then know that real estate heiress Leona Helmsley left $12 million in her will in trust for her four-legged friend, Trouble. She also created a charitable trust valued at between $5-8 billion. In a two-page mission statement, she expressed her desire that the trust funds be used for the care and welfare of dogs.

In my post dated December 31, 2008 -- titled “Leona’s Wishes May Be Thrown To The Dogs” -- I opined that a court might construe the mission statement as constituting merely a precatory request, not a mandatory directive. On February 26, 2009, in my post titled “A Sop For Cerberus”, I reported that in an “advice and direction” proceeding, New York County Surrogate Troy Webber had indeed decided that Ms. Helmsley’s trustees had the discretion to distribute the funds to charities as they saw fit, not just to canine causes.

Not content to let sleeping dogs lie, however, four animal welfare charities sought to intervene in the proceeding after the fact and vacate the court’s decision. They argued to the court that their causes were insufficiently protected by the New York State Attorney General and that they should have an opportunity to be heard in the matter. However, in a Decision and Order dated April 15, 2011, Surrogate Nora Anderson denied their application.

Essentially, the court found no reason to depart from the general rule that possible trust beneficiaries or members of a class of possible beneficiaries do not have standing to participate in court proceedings to enforce the provisions of the trust. The court also rejected the proposed intervenors’ argument that they fell within a narrow exception to that general principle, affording standing to a particular group with a special interest in funds held for a charitable purpose. Instead, as the court explained, by statute the Attorney General is conferred with the authority to represent all possible unnamed charitable beneficiaries. Further, the court rejected the charities’ argument that the Attorney General failed to doggedly protect their interests.

This decision will no doubt leave the proposed charitable intervenors a bit dog-eared. But it appropriately -- and thankfully (I’m all out of dog puns) -- brings closure to a nearly 25-year-old saga (in dog years, of course: http://www.onlineconversion.com/dogyears.htm).

Undue Influence or Duress?

Frank Santoro — Thu, 28 Apr 2011 08:54:02 -0500

In a recent decision in the Estate of Mildred Rosasco , Surrogate Glen carefully explains the difference between undue influence and duress, two legal concepts that have become conflated in Surrogate's Court practice.

If you speak with a trusts and estate's lawyer and ask her to define undue influence, you will hear something like “undue influence is moral coercion that destroys a testator’s will to act independently and leads the testator to act contrary to his own desires because he cannot refuse or is too weak to resist.” However confident that lawyer sounded in her recitation of this definition, understand that the Court of Appeals has stated, as Surrogate Glen tells us, that "[i]t is impossible to define or describe with precision and exactness what is undue influence . . ." In Rosasco, Surrogate Glen explains how courts have struggled with the concept of undue influence, citing to decisions dating back to the 19th Century, and how the Court of Appeals, in Matter of Walther (6 NY2d 49 [1959]), affirmed the explanation of undue influence cited above.

What is critical in a probate contest involving an objection on the grounds of undue influence is that a prima facie case of undue influence requires a showing, not only of opportunity and motive to exercise undue influence, but also, of the actual exercise of undue influence. Although undue influence can be proven by circumstantial evidence, as there is rarely direct proof of undue influence, it can only be proven by substantial circumstantial evidence. Undue influence is difficult to prove, but the burden of proving undue influence is eased where there is a showing that the testator was in a relationship of trust and dependence with proponent of the will, i.e., the existence of a confidential relationship. Surrogate Riordan’s decision in Matter of Zirinsky is a must read for anyone trying to get a handle on undue influence (Also review the Appellate Court decision on the appeal of the Zirinsky case).

As to duress, Surrogate Glen, citing the Restatement (Third) of Property, notes that duress is something different from undue influence. She explains that a will or a bequest is procured by duress if the wrongdoer threatened to perform or did perform a wrongful act that coerced the testator into doing something that she would not otherwise have done. A “wrongful act” in this definition means a criminal act or an act that the wrongdoer had no right to do.

One can understand how the two concepts differ by examining a three-year-old child’s threats. When a three-year-old has his mind set on eating a second piece of chocolate or on watching a cartoon that features incredible acts of violence, he might threaten to flush his father "down the toilet." In the alternative, he might repeatedly and sincerely state that he will not talk to his father until he receives his chocolate or is gratified by watching Spiderman deliver bone-crushing blows. Flushing another human being down the toilet would certainly constitute a crime. The three-year-old child’s father taking this threat seriously and acting on this threat could be said to be acting under duress. On the other hand, absent some legal relationship, such as that which a guardian has with his ward, a person is well within his rights to refuse and refrain from talking or associating with another. If the three-year-old child’s father is acting on the child’s threat to cut off all communication, he might be said to be acting as a result of undue influence.

Same-Sex Marriages and the Marriage Recognition Rule

Eric Penzer — Tue, 19 Apr 2011 10:09:52 -0500

A recent decision of the Appellate Division, First Department, demonstrates that notwithstanding the New York State Legislature’s failure to enact legislation authorizing same-sex marriages in New York State, the Surrogate’s Courts will still recognize such marriages pursuant to the so-called “marriage recognition rule.”

In Matter of Ranftle, 81 AD2d 566 (1st Dept 2011), the Appellate Division was called upon to determine the propriety of an order of the Surrogate’s Court, New York County (Kristen Booth Glen, S.), denying the vacatur of a decree admitting a will to probate. In his will, the decedent made bequests to three brothers and a goddaughter. He left his residuary estate to his same-sex partner, the respondent on the appeal. Respondent and the decedent had married in Canada two months prior to the execution of the decedent’s will. The decedent nominated respondent as the executor of his estate. Respondent, as the executor named in the will, commenced a probate proceeding, identifying himself as the decedent's surviving spouse and sole distributee of the decedent's estate. Respondent subsequently served the legatees with notice of probate, and the Surrogate's Court ultimately issued a decree granting probate of the will.

The Surrogate’s Court issued an opinion finding that respondent was “decedent’s surviving spouse and sole distributee” and, accordingly, determined that service of process in the probate proceeding was not required to issue to anyone under SCPA § 1403(1)(a), which enumerates those entitled to service of process in probate proceedings. The court found that the decedent’s same-sex marriage to respondent was valid under Canada law and did not fall into either of the two exceptions to the “marriage recognition rule,” as the marriage was not affirmatively prohibited or “proscribed by natural law.” Accordingly, the court found that the marriage was entitled to recognition.

One of the decedent’s brothers, the appellant in the appeal, sought vacatur of the probate decree, asserting that the marriage was not entitled to recognition by the court as it violated New York public policy. Accordingly, appellant argued that the decedent’s three brothers were the sole distributees of the estate and therefore entitled to process in the probate proceeding. The Surrogate’s Court denied the petition for vacatur.

The Appellate Division affirmed the Surrogate’s order. It explained that New York’s “marriage recognition rule affords comity to out-of-state marriages and ‘recognizes as valid a marriage considered valid in the place where celebrated’” (id., quoting Van Voorhis v Brintnall, 86 NY 18, 25 [1881]). The court also noted, however, that the rule does not apply where the foreign marriage is “‘contrary to the prohibitions of natural law or the express prohibitions of a statute’” (id., quoting Moore v Hegeman, 92 NY 521, 524 [1883]). However, same-sex marriage, according to the court, does not fall within either of the two exceptions to the marriage recognition rule (see id.).

The Appellate Division expressly rejected appellant’s argument that the Legislature’s failure to enact a bill authorizing same-sex marriages demonstrates that such marriages are against the public policy of the State. The court made clear that the Legislature’s failure to enact a bill “‘affords the most dubious foundation for drawing positive inferences’” (id., quoting Clark v Cuomo, 66 NY2d 185, 190-191 [1985]).

Notably, in denying the petition for vacatur, the Surrogate relied upon the decision of the Appellate Division, Fourth Department, in Martinez v County of Monroe, 50 AD3d 189 [4th Dept 2008], lv. dismissed, 10 NY3d 856 [2008). There, the Appellate Division held that a Canadian same-sex marriage was entitled to recognition for purposes of the laws governing spousal health care benefits. The court determined that there is no legislation in the State prohibiting the recognition of same-sex marriages validly entered into outside of New York and, thus, the “positive law” exception to the marriage recognition rule does not apply. Moreover, the court determined that the “natural law” exception to the rule also does not apply to same-sex marriages, as that exception has generally been limited to marriages involving polygamy or incest, or marriages “offensive to the public sense of morality to a degree regarded generally with abhorrence” (id., quoting Matter of May, 305 NY 486, 493), which would not include a same-sex marriages.

The Appellate Division in Ranftle agreed with the Surrogate’s Court that the appellant’s “public policy” argument was specifically addressed and rejected by the Martinez court.

Thus, while the New York State Legislature has not seen fit to enact legislation authorizing same-sex marriages, it also has not enacted legislation prohibiting the recognition of such marriages validly entered into outside of the State. Accordingly, same-sex spouses may well be entitled to the rights and benefits generally afforded to heterosexual spouses, whether they be spousal health-care benefits or inheritance rights.

Lessons of Constructive Trusts Continued

Ilene Cooper — Mon, 11 Apr 2011 10:20:38 -0500

The recent entry by Jaclene D’Agostino addressed the issue of constructive trusts. From that, we learned that a constructive trust is characterized by four elements: (1) a confidential or fiduciary relationship; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust enrichment. While not an express trust in kind, a constructive trust is an equally useful device created by operation of law in order to promote equity. Although the Court of Appeals in Latham v. Father Devine, 299 NY 22 (1949) and Matter of O’Hara’s Will, 95 NY 403 (1884), cited by Ms. D’Agostino in her article, imposed a constructive trust under the circumstances presented, the Surrogate’s Court, Suffolk County in Dext v. Rorech III, Individually and as Executor of the Estate of William Rorech, Jr., NYLJ, 2/18/11, p.33 (col. 5) rejected that result for reasons explained below.

Before the court in Dext was a motion for summary judgment brought by the fiduciary in an action concerning the parties’ rights with respect to the decedent’s realty. The decedent’s Will was admitted to probate in Florida, and his son was appointed fiduciary of his estate. Thereafter, the fiduciary was appointed ancillary executor of the decedent’s estate in order to pursue an eviction in connection with the decedent’s home in Smithtown. The fiduciary alleged that the resident at the premises had been residing there rent-free for over a year since the decedent’s death.

Subsequently, the resident instituted an action, as plaintiff, in Supreme Court against the fiduciary alleging, inter alia, a cause of action in constructive trust, and requesting that she be given a life estate in the property. An answer was filed, and the fiduciary then moved for summary relief alleging, inter alia, that the decedent was the sole owner of the property, that there was no provision in the Will for plaintiff, that there was no written instrument evidencing the plaintiff’s right to occupy the premises, and that there was no proof of the promise(s) alleged. In opposition to the motion, plaintiff maintained that there were triable issues of fact as to whether the decedent had made an oral promise to plaintiff of a life estate in the premises, and, that there was part performance of same when decedent had plaintiff relocate from her home in Montauk to the Smithtown property. Further, plaintiff submitted her signed affidavit to support her claims, naming a number of witnesses who would testify on her behalf. The fiduciary replied.

In the interim, the action was transferred to the Surrogate’s Court pursuant to a so-ordered stipulation of the parties.

In granting the fiduciary’s motion for summary judgment, the court opined that in order to establish a claim for constructive trust four elements must be proven: 1) a confidential or fiduciary relationship between the parties; 2) a promise; 3) a transfer in reliance on the promise, and 4) unjust enrichment. Although the court noted that plaintiff had a close, confidential relationship with the decedent, it found that plaintiff had failed to prove the other required elements of a constructive trust.

Significantly, the court found that plaintiff would be the primary witness in support of her claim, inasmuch as she failed to oppose the defendant fiduciary’s contention that these witnesses expressed no knowledge of the purported promise to plaintiff by the decedent. Further, the court noted that although plaintiff alleged that she had other witnesses to testify on her behalf, she failed to offer any proof regarding these witnesses other than her own self-serving affidavit. Additionally, the court opined that plaintiff’s contention that she gave up her home in Montauk based upon the decedent’s alleged promise was insufficient to demonstrate a transfer in reliance or unjust enrichment.

Finally, the court held that plaintiff’s theory based upon part performance of an oral contract to give plaintiff a life estate also failed, on the grounds that her move from her Montauk home could not reasonably be viewed as unequivocally referable to the alleged agreement she had with the decedent.

Hence, it can be seen from the foregoing, that while a cause of action based in constructive trust may be a useful tool in obtaining equitable relief, the failure to prove the requisite elements thereof can prove fatal in some circumstances.

What is a Constructive Trust?

Jaclene D'Agostino — Mon, 28 Mar 2011 09:36:37 -0500

Most simply explained, a constructive trust is an equitable remedy imposed to prevent unjust enrichment (see Simonds v Simonds, 45 NY2d 233, 242 [1978]; Sharp v Kosmalski, 40 NY2d 119 [1976]). According to the Court of Appeals, the constructive trust is “the formula through which the conscience of equity finds expression. Where property has been acquired in such circumstances that the holder of legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee” (Beatty v Guggenheim Exploration Co., 225 NY 380, 386 [1919]).

It is an amorphous doctrine, as the constructive trust is “not limited by rigid definition and its very purpose requires flexibility in its application” (In re Alpert, 9 Misc 3d 1102[A], *10). It therefore follows that the constructive trust “has been famously described as a remedy applicable to ‘whatever knavery human ingenuity can invent’” (In re Alpert, 9 Misc 3d at *7 [Sur Ct, New York County 2005], quoting Bogert, Trusts and Trustees Sec. 471 at 29 [2d ed rev]). In fact, it is of such broad scope that attempted precise definitions have been deemed inadequate (see Simonds v Simonds, 45 NY2d 233, 241 [1978]).

Even applicable in the case of an innocent donee, no wrongful act is necessary to find unjust enrichment warranting the imposition of a constructive trust. However, in the case of a bona fide purchaser, he or she takes property free of a constructive trust that would otherwise be imposed (5 Scott, Trusts [3d ed] sec.468).

A constructive trust “is perhaps more different from an express trust than it is similar”, in that “the constructive trustee is not compelled to convey the property because he is a constructive trustee; it is because he can be compelled to convey that he is a constructive trustee” (Simonds v Simonds, 45 NY2d 233, 241 [1978], relying on 5 Scott, Trusts [3d ed], sec. 461-462]). Generally, the following elements must be established to state a claim for this type of relief: (1) a confidential or fiduciary relation; (2) a promise; (3) a transfer in reliance thereon; and (4) unjust enrichment (see Sharp v Kosmalski, 40 NY2d 119, 121 [1976]). Nonetheless, unlike most causes of action, courts do not require strict satisfaction of each element, but rather use them more as flexible considerations (Lester v Zimmer, 147 AD2d 340, 341 [3d Dept 1989]).

Courts most often impose constructive trusts where traditional remedies prove inadequate or unavailable. Perhaps most illustrative in the context of trusts and estates is the landmark case of Latham v Father Divine, 299 NY 22 (1949), where the facts seemed appropriate for a claim for tortious interference with wills, a cause of action that is not recognized by New York law (see Restatement (Second) of Torts §774B [1979-2010], citing Vogt v Witmeyer, 87 NY2d 998, 999 [1996]).

In Latham, the decedent had executed a will, but later expressed a desire to create a new testamentary instrument to contain bequests to other individuals. However, due to fraud, undue influence, and ultimately murder committed by the defendant, the decedent was prevented from executing her new will.

As is often the case where a constructive trust proves to be the appropriate remedy, the Court of Appeals recognized that there was no precedent precisely on point to address the facts presented. But the Court relied upon other well-respected authorities and explained that “[w]here a devisee or legatee under a will already executed prevents the testator by fraud, duress or undue influence from revoking the will and executing a new will in favor of another or from making a codicil, so that the testator dies leaving the original will in force, the devisee or legatee holds the property thus acquired upon a constructive trust for the intended devisee or legatee” (Latham v Father Divine, 299 NY 22 , 26 [1949]).

In light of that rule, along with other analogous Court of Appeals decisions, the Court held that the imposition of a constructive trust was appropriate, as “its applicability is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them” (299 NY at 27). The Court further stated that “a constructive trust will be erected whenever necessary to satisfy the demands of justice” (see id.).

In coming to its conclusion, the Court cited Matter of O’Hara’s Will, 95 NY 403 (1884), noting that the plaintiffs in that case successfully obtained a constructive trust in their favor, notwithstanding the fact that “disappointed hopes and unrealized expectations were all that the secretly intended beneficiaries, not named in the will, had,” as well as Williams v Fitch, 18 NY 546 (1859), in which the fraud “consisted of the legatee’s failure or refusal to carry out the testator’s designs, after tacitly or expressly promising so to do” (see Latham, 299 NY at 27). Notably, in Latham, there was no discussion of a fiduciary or confidential relationship, one of the elements generally considered in determining the appropriateness of imposing a constructive trust.

In sum, the constructive trust is a remedy that may be applied in a variety of situations where equity demands, despite the feasibility of strictly satisfying its elements, and should be kept in mind as a potential claim to correct a wrong that may not fit squarely within any other cause of action.