Having examined countless witnesses in probate and other contested Surrogate’s Court proceedings, many of us have grown accustomed to learning that critical documents were destroyed by a “flood.”  That flood, almost invariably, occurred “in the basement.”  The flood narrative is met with the usual inquiry into the cause of the flood, the property destroyed in the flood, the insurance claim made in the wake of the flood, the whereabouts of the paperwork associated with the insurance claim resulting from the flood, etc.  Extracting electronic data as part of the e-discovery process has minimized the loss of potentially probative documents as a result of the basement flood.   An article in the latest New York State Bar Journal by David Paul Horowitz discusses how electronic disclosure issues featured prominently in a recent Erie County probate proceeding.

E-discovery issues aside, a recent case decided by the Richmond County Surrogate revisits the law pertaining to probating lost or damaged wills.  In Matter of Larsen, N.Y.L.J., Aug. 5, 2016, p.32 (Sur. Ct., Richmond Co.), the decedent’s will, apparently damaged in a flooded basement to the extent that the signatures thereon were washed clean, was admitted to probate.  While there is nothing extraordinary about the case, it illustrates the approach and analysis employed by the courts when addressing whether a lost or destroyed will ought to be admitted to probate.

The decedent took receipt of his original will from his attorney, and placed it in his  personal safe in the basement of his home along with other important papers.  The floodwaters then enveloped his safe.  According to the proponent, both he and the decedent believed that the safe was waterproof and thus, neither he, nor the decedent, checked the contents of the safe after the flood.  When the decedent died, the proponent opened the safe to retrieve the will and discovered the water damaged will affixed with rusty staples.  The signature pages contained indentations of pen markings where the signatures apparently once appeared but had been washed clean.

The proponent offered a conformed copy of the decedent’s will, which was in the possession of the attorney draftsperson, together with the original water damaged document for probate.  The attesting witnesses provided affidavits as to due execution with the probate petition.

The Court examined SCPA 1407, which provides that a lost or destroyed will may be admitted to probate only if (1) it is established that the will has not been revoked, and (2) execution of the will is proved in the manner required for the probate of an existing will, and (3) all of the provisions of the will are clearly and distinctly proved by each of at least two credible witnesses or by a copy or draft of the will proved to be true and complete.

Under the circumstances presented, the court found that the decedent never intended to revoke his will.  According to the court, the decedent’s act of placing the will in his waterproof safe and never checking on the condition of the contents of the safe even after the flood, pointed to the decedent’s continued desire in maintaining his testamentary plan as set forth in the will.  The court was satisfied by the conformed copy and the affidavits of the attesting witness that the will was duly executed.  The court was further satisfied that the fact that decedent’s will was found in his safe with all of his other important documents clearly established that he did not intend to revoke his will, but rather that the original will was damaged with the decedent’s other personal possessions.  The will was admitted to probate.

Keep in mind here that the proponent in Larsen was the decedent’s sole distributee, and the proceeding appears to have been uncontested.  The decision does not mention the decedent’s testamentary plan as set forth in the damaged will, and does not mention the potential existence of prior testamentary instruments benefiting persons potentially adversely affected by the propounded instrument.  The Dead Man’s Statute and other potential impediments to the propounded will being admitted to probate were not factors in this case.

In two recent decisions, Surrogate Lopez Torres of Kings County denied petitions for guardianship under SCPA Article 17-A, demonstrating the strict circumstances under which guardians are appointed under this particular statute.  SCPA §1750-a applies to persons who are intellectually disabled (as that term has generally been substituted for the archaic term “mental retardation” which appears in the statute) and are permanently or indefinitely incapable of managing his or her own affairs.  The statute requires that the condition be certified by a licensed physician and a licensed psychologist (or two licensed physicians, one of whom is familiar with  or has knowledge of the care and treatment of the disabled person); and that the court is satisfied that appointing a guardian is in the best interests of the disabled person.  Unlike under Article 81 of the Mental Hygiene Law, the court has no discretion or authority to limit or tailor the powers of a guardian under Article 17-A.  Thus, in both proceedings, the court was quite cognizant of the fact that an Article 17-A guardianship is the “most restrictive type of guardianship available” in this State because it “completely removes that individual’s legal right to make decisions over her own affairs and vests the guardian ‘virtually complete power over such individual’” (Proceeding for the Appointment of a Guardian for Michelle M., 2016 NY Slip Op 51114(U) at *3 [Sur Ct., Kings County]).  The potential loss of liberty was the court’s primary concern.

In Proceeding for the Appointment of a Guardian for Michelle M., decided on July 22, 2016, the parents of a 34 year-old diagnosed with Down’s Syndrome petitioned to become their daughter’s guardian, claiming that she was unable to make medical and other decisions regarding her welfare.  The petition contained the requisite certifications, which opined, according to the court, in conclusory fashion, that Michelle was not capable of managing herself or appreciating the nature and consequences of health care decisions.  However, the record revealed that Michelle led an independent life and made her own decisions.  She lived with roommates in an apartment, shopped for and cooked her own food, held a part-time job for six years, managed her own finances, traveled independently, and made and kept her own doctors’ appointments on a regular basis.  In the face of this evidence, the court was particularly concerned with whether appointing a guardian based on the medical certifications “without careful and meaningful inquiry into the individual’s functional capacity, relies on the incorrect assumption that the mere status of intellectual disability provides sufficient basis to wholly remove an individual’s legal right to make decisions for himself” (id. at *4).  The court had no doubt that the petitioners loved and wanted to protect their daughter, but noted that the standard for appointing a guardian was not whether they could make better decisions for Michelle, but rather, whether Michelle had the capacity to make decisions for herself, which was not disputed.

In Estate of Antonio C., NYLJ, July 26, 2016, p. 25, col. 4 (Sur Ct, Kings County), also decided on July 22, 2016, the court’s decision to deny the petition for guardianship over the 66 year-old was seemingly easier.  First, the statutory requirements were not met, as there was no evidence that the respondent’s purported disability was present before he was 22 years old.  Additionally, it appeared to the court that the petitioner had a personal motive for seeking guardianship.  The petitioner was a former boyfriend of the respondent’s sister, and had lived with the respondent for nine months in a New York City Housing Authority apartment.  According to the petitioner, he could not be added to the respondent’s lease unless he became his legal guardian.  Moreover, the evidence adduced at the hearing showed that the respondent could manage his own affairs and possessed essential living skills; he had lived on his own for a period of time before the petitioner moved into his apartment.  Given these factors, the court concluded that a tailored guardianship was more appropriate than the global guardianship under Article 17-A.

On August 19, 2016, Governor Cuomo signed into law an amendment to CPLR §4503(b) which creates another exception to the attorney-client privilege in the case of revocable trusts. The first such exception, initially enacted pursuant to the provisions of CPA 354 (the predecessor to CPLR §4503[b]), provides that the privilege will not apply “in any action involving the probate, validity or construction of a will” (see CPLR §4503[b]).  The 2016 exception expands CPLR §4503(b) to now include actions, after the grantor’s death, involving revocable trusts.

The purpose of the attorney-client privilege is to promote the use of legal representation by assuring clients that they may freely confide in their counsel without concern that such confidences may be divulged to outsiders (see Matter of Colby, 187 Misc 2d 695 [Sur Ct, New York County 2001], citing Priest v Hennessey, 51 NY2d 62, 67-68 [1980]). Nevertheless, to the extent it shields evidence from disclosure, it obstructs the fact-finding process (see Matter of Colby, 187 Misc 2d 695, 697).

With this balanced approach in mind, the recent bill amending CPLR §4503(b) finds its justification in the pre-existing exception to the attorney-client privilege in the case of probate contests, and the fact that revocable trusts serve as the equivalent of wills.  However, it should be noted that the exception only applies after the death of the grantor, in recognition of the fact that a party, other than the grantor, has no standing to challenge a revocable trust during the grantor’s lifetime (see N.Y.S. Assembly Memorandum in Support of Legislation, citing Matter of Davidson, 177 Misc 2d 928, 930 [Sur Ct, New York County 1998]).

In construing an in terrorem provision, or any part of a will, the paramount consideration is identifying and carrying out the testator’s intent.  Although paramount, the testator’s intention will not be given effect if doing so would violate public policy.  For example, an in terrorem provision that purports to prevent a beneficiary from questioning a fiduciary’s conduct is void as contrary to public policy (see Matter of Egerer, 30 Misc 3d 1229[A], at *1-4 [Sur Ct, Suffolk County 2006]).  The recent decision in Matter of Sochurek, NYLJ, July 20, 2016, p. 31 (Sur Ct, Dutchess County June 30, 2016), illustrates the difficulty in reconciling the testator’s intention in respect of an in terrorem condition with the rights of beneficiaries to obtain an accounting or otherwise challenge the actions of their fiduciary.

Sochurek involved a dispute between the decedent’s spouse, who was the executor of his estate, and his two daughters from a prior marriage.  Decedent owned a 50% membership interest in an LLC that owned real property and a business.  The will bequeathed “an estate for life” in the LLC to decedent’s wife, including the right to receive income therefrom.  Upon his wife’s death, “her life interest shall terminate” and the LLC was bequeathed to his two daughters.  The will also contained provisions, likely boilerplate, regarding the executor’s powers to sell estate assets.

After the will had been admitted to probate, the executor/spouse sold the LLC’s real property and business.  The executor and decedent’s daughters entered into a “standstill agreement” providing that any funds the executor received from the sale would be held in a segregated “Life Estate Account” from which no withdrawals would be made for a period while the daughters had an opportunity to appraise the LLC assets and negotiate a reasonable treatment of the proceeds.

Before the standstill agreement expired, the daughters commenced an action against the executor in Supreme Court.  The daughters asserted causes of action for, inter alia, breach of fiduciary duty and an accounting.  An order to show cause enjoined the executor from withdrawing any funds in the “Life Estate Account.”  The ultimate relief sought in the order to show cause was a temporary restraining order and an accounting.  These claims were grounded in the executor’s sale of estate property (assets of the LLC) and actions thereafter as to the proceeds.

The in terrorem provision in the will was directed toward any person who “shall, directly or indirectly, institute or become a party to any proceedings to set aside, interfere with, or make null any provision of this Will, or to offer any objections to the probate thereof . . .” (emphasis added).

The executor commenced a construction proceeding in the Surrogate’s Court contending the daughters’ Supreme Court action interfered with her authority as executor and prevented her from accessing/managing estate assets, thereby triggering the in terrorem clause.  In response, the daughters contended they never contested their father’s will and, to the contrary, conceded its validity.  The daughters asserted that their lawsuit is focused on the executor’s “egregious abuse of her fiduciary duties” and breach of the standstill agreement.

In ascertaining the testator’s intent, the Court reviewed the fiduciary powers article in the Will which gave the executor broad powers to sell, exchange or otherwise dispose of all estate property on such terms as the executor deemed advisable.  Thus, the Court concluded, the executor undoubtedly had the power to dispose of the LLC.  The Surrogate held:

The clear intent of the testator upon a complete reading of the will was to give the executrix of his estate the necessary and broad powers to manage the property as she saw fit.  The Court finds the [daughters] have violated [the in terrorem provision] by commencing an action in the Supreme Court, Westchester County challenging the executrix’s action with regard to the disposition of estate assets, thereby “interfer[ing] with any provision of this Will” [quoting the in terrorem provision]. By interfering with the executrix’s management and ultimate sale of [the LLC], the [daughters] have violated the in terrorem clause of the will and have forfeited their legacies (Matter of Sochurek, NYLJ, July 20, 2016, p. 31 at *8).

The daughters had a beneficial interest in the assets of the LLC which the executor held in a fiduciary capacity.  The relief sought by the daughters in Supreme Court included an accounting and damages for mismanagement of estate assets, including alleged self-dealing.  In Egerer, supra, the Surrogate’s Court held, “any attempt by a testator to preclude a beneficiary from questioning the conduct of the fiduciaries, from demanding an accounting from said fiduciaries or from filing objections thereto will result in a finding that the pertinent language is void as contrary to public policy and the applicable statutes of the State of New York” (Matter of Egerer, 30 Misc 3d 1229[A], *3 [Sur Ct, Suffolk County 2006]).

Thus, following Egerer, had the daughters petitioned the Surrogate’s Court successfully for a compulsory accounting and objected to the executor’s accounting alleging the sale of the LLC assets was self-interested, that the executor misappropriated estate assets and breached an agreement as to the management of estate assets, it does not appear the in terrorem condition would have been triggered.

What about obtaining a provisional remedy, such as a TRO, in the context of the accounting?  It would seem inconsistent to allow beneficiaries the right to pursue objections to an accounting without forfeiting an interest in the estate by triggering an in terrorem condition, but deprive them of the ability to seek a provisional remedy securing their interests in the subject of the proceeding.  While the daughters in Sochurek obtained a TRO that interfered with the executor’s management of estate assets, it was in the context of a plenary action seeking an accounting and otherwise challenging the executor’s conduct (cf. Egerer, supra).

As the Sochurek decision illustrates, the case law on the scope and validity of in terrorem conditions continues to develop, and the outcome of each proceeding depends on the particular provisions of the will and the unique, fact-specific circumstances related to the conduct of the party alleged to have violated the condition.

Estate litigators arguably see more probate contests than any other type of conflict. While the details are always unique, they almost always include allegations that someone unduly influenced the decedent to change his or her will to either disinherit, or favor, a particular person.  These cases also often include an allegation — which is usually contested — that the purported influencer was in a “confidential relationship” with the decedent.  The frequency of such claims beg the questions (1) what exactly is a “confidential relationship,” and (2) what is the practical benefit to an objectant in establishing that one existed?

A confidential relationship is characterized as unique degree of trust and confidence between the parties, one of whom has superior knowledge, skill or expertise and is under a duty to represent the interests of the other. Some relationships are considered confidential as a matter of law, i.e., attorney-client, guardian-ward, and physician-patient, to name a few, while others will be deemed confidential as a matter of fact, based upon the details of the relationship, i.e., when one person is dependent on, and subject to the control of, another (see Matter of Satterlee, 281 AD 251 [1st Dept 1953]).

In a probate contest, it always is the burden of the objectant to prove that someone perpetrated undue influence upon the testator by establishing motive, opportunity, and the actual exercise of that undue influence (Matter of Walther, 6 NY2d 49, 55 [1959]; see Matter of Ryan, 34 AD3d 212, 213-14 [1st Dept 2006]).  However, where it is established that the decedent was in a confidential relationship with the alleged influencer, and there were other “suspicious circumstances” present (such as the alleged influencer having retained the attorney-draftsman for the decedent, or having accompanied the decedent to the will execution, for example) an inference of undue influence arises.  That inference requires the person in the confidential relationship to explain the circumstances surrounding the relationship between him and the decedent, and to establish by clear and convincing evidence that the subject bequest was fair and voluntary. (see Matter of Neenan, 35 AD3d 475, 476 [2d Dept 2006]; Matter of Bartel, 214 AD2d 476 [1st Dept 1995]).

As with most aspects of the law, there is an exception. Where the person in the confidential relationship also shared a close family relationship with the decedent, no inference of undue inference arises, and therefore, no explanation of a bequest in favor of that person will be required (see Matter of Walther, 6 NY2d 49 [1959]; Matter of Zirinsky, 10 Misc 3d 1052[A] [Sur Ct, Nassau County 2005]). This is generally because “a sense of family duty is inexplicably intertwined in this relationship” (Matter of Zirinsky, 10 Misc 3d at *8-9).  The exception exists despite the presence of “suspicious circumstances.”  Unsurprisingly, this often leads to questions about what degree of family relationship is close enough to negate the inference.

It must be noted that the inference of undue influence that may arise as a result of a confidential relationship should not be confused with shifting the burden of proof from the objectant (see Matter of Neenan, 35 AD3d 475 [2d Dept 2006]).  The burden of proving undue influence in the context of a will contest never shifts (see Matter of Bach, 133 AD2d 455, 456 [2d Dept 1987] quoting Matter of Collins, 124 AD2d 48, 54 [4th Dept 1987]).  The inference just makes it a little bit easier for an objectant to satisfy that burden, and ultimately succeed in his or her case.

In 2010, the Appellate Division, Second Department, made it clear that principles of equity grounded in rules of forfeiture can adversely impact a surviving spouse’s entitlement to an elective share. In Campbell v. Thomas, 73 AD3d 103 (2d Dept 2010),  the Appellate Division rendered a decision of first impression when it denied the right of election asserted by the decedent’s surviving spouse based on the equitable principle that a party may not profit from his or her own wrongdoing.  In Matter of Berk, 71 AD3d 883 (2d Dept 2010), the Appellate Division adhered to the foregoing principles when it reversed a decree of the Surrogate’s Court, Kings County, which granted the petitioner, the surviving spouse of the decedent, summary judgment determining the validity of her right of election against the decedent’s estate. Following the 2010 opinion in Matter of Berk, the case continued to wind its way through the Surrogate’s Court as it headed towards trial.

Recently, the Appellate Division, Second Department, had the opportunity to readdress the parties in Matter of Berk, and provide practitioners with further instruction on the issues impacting the claimed elective share. Specifically, the Court modified an order of the Surrogate’s Court, Kings County (Johnson, S.) by (1) adding as an issue of fact to be tried the question of whether the petitioner, the decedent’s surviving spouse, exercised undue influence upon the decedent to induce him to marry her for the purpose of obtaining pecuniary benefits from his estate, and (2) replacing so much of the order, as imposed the burden of proof on appellants, the executors of the estate, by clear and convincing evidence, with a provision that placed the burden of proof on appellants by a preponderance of the credible evidence (see Matter of Berk, 133 AD3d 850 [2d Dept 2015]).

As readers may recall, the underlying proceeding involved a petition by the surviving spouse of the decedent for a determination of the validity and effect of her exercise of her right of election against his estate pursuant to EPTL 5-1.1-A.  In their answer, the appellants, the executors of the estate, asserted as an affirmative defense that the decedent was incompetent to enter into a marriage, that the petitioner knew that he was incapable of entering into a marriage, and that the petitioner had exercised undue influence over the decedent to convince him to marry her.

As stated, on a prior appeal, the Appellate Division, Second Department, reversed an order granting summary judgment to the petitioner, finding that there was an issue of fact as to whether the petitioner had forfeited her right of election by her alleged wrongdoing; that is, by marrying the decedent knowing that he was mentally incapable of consenting to a marriage for the purpose of obtaining pecuniary benefits from his estate. The Court further ruled that the appellants’ counterclaims alleging undue influence were improperly dismissed.

On remitter to the Surrogate’s Court, Kings County, the parties submitted proposed statements of the issues to be determined at trial, as well as proposals concerning the burden and quantum of proof on the issues. In the order appealed from, the Surrogate’s Court limited the issues for trial to whether the decedent was mentally incapacitated and incapable of consenting to his marriage to the petitioner, and if so, whether the petitioner took unfair advantage of him by marrying him for the purpose of availing herself, as his surviving spouse, of his estate at death. The Surrogate further ruled that the appellants/executors had the burden of proof on the issues by clear and convincing evidence. The Surrogate did not include the issue of undue influence as a matter to be determined.  The executors appealed.

The Appellate Division opined that the issue of whether the petitioner had forfeited her elective share under the circumstances raised by the proceeding was based on the equitable doctrine that the petitioner should not profit from her own wrongdoing. Where a claim of wrongful conduct is made, the parties asserting same, i.e., the appellants, have the burden of proving the wrongdoing by a preponderance of the evidence.  The Court further held that evidence of a confidential relationship between the petitioner and the decedent, by virtue of their marriage, was not, in itself, proof of the petitioner’s wrongdoing, and, as such, did not shift the burden of proof to the petitioner to prove otherwise.

Additionally, the Court held that an alternative ground for forfeiture of the right of election was whether the petitioner exercised undue influence upon the decedent to induce him to marry her. Again, the Court determined that the appellants had the burden of proof on this issue by a preponderance of the credible evidence.

The Berk matter is now primed for trial. Stay tuned for what is sure to be an instructive outcome.

A recent decision of the Kings County Surrogate’s Court[1] demonstrates the importance of thoroughly analyzing all aspects of a statute of limitations defense prior to making a dismissal motion.  In Matter of Coiro, 5/6/2016 NYLJ p.23, col. 2, the court denied such a motion, determining that an SCPA § 2104 turnover proceeding was timely.  Notably, the parties disputed both the applicable limitations period and the date of the claim’s accrual.  Side-stepping both those issues, the court determined that a statutory toll rendered the claim timely in any event.

Determining whether a claim has been timely asserted requires analysis of at least three factors – the applicable limitations period, the date of the claim’s accrual, and whether any toll applies.  (I say “at least” three factors because, in an appropriate case, a court may determine other matter – such as whether a defendant/respondent is equitably estopped from asserting the statute of limitations, where specific actions by the defendant/respondent “somehow kept [the plaintiff] from timely bringing suit” [see Zumpano v Quinn, 6 NY3d 666, 674 (2006)].) Coiro involved all three factors.

Janet Coiro died on January 16, 2012. Some 19 months later, one of her daughters, the executor nominated in her last will and testament, offered the will for probate, receiving letters testamentary on December 18, 2013.  On June 12, 2015, more than three years after the decedent’s death, the executor brought a turnover proceeding pursuant to SCPA § 2104,[2] alleging that on the day after the decedent died, January 17, 2012, the respondent (the decedent’s son) submitted a power of attorney to the bank at which the decedent maintained several accounts, adding his name to those accounts.  Allegedly, respondent also deposited a matured Treasury bill (of which the executor claimed to be the beneficiary) into one of the accounts, and later withdrew or transferred all the funds from the accounts.  Respondent moved to dismiss the proceeding as time-barred.

The parties disputed the applicable limitations period. Respondent argued that the three-year period applicable to conversion claims governed, while the executor argued that respondent’s action in improperly adding his name to the decedent’s bank accounts after her death warranted application of the six-year limitations period applicable to fraud-based claims.

Petitioner also argued, alternatively, that even if the three-year “conversion” limitations period applied, the claim accrued not on the date on which the respondent added his name to the bank accounts, but on the date he transferred the balances thereof, to wit, May 17, 2013, and thus the proceeding was timely in any event.

While noting that discovery and turnover proceedings are usually subject to the three-year statute of limitations applicable to actions in replevin and conversion, i.e., CPLR 214(3), the court further noted that it was not required to decide whether that period or a six-year period applied.  It also noted that it was not required to decide the date of accrual of the claim.  The court determined that the proceeding was timely in any event, by reason of the toll provided in CPLR § 210(c).

Section 210(c) provides that “[i]n an action by an executor or administrator to recover personal property wrongfully taken after the death [of a decedent] and before the issuance of letters,  . . . the time within which the action must be commenced shall be computed from the time the letters are issued or from three years after the death, whichever event first occurs.”

The court determined that the limitations period applicable to the claim asserted in the proceeding was tolled until December 18, 2013 (the earlier of the date of issuance of letters or three years from the date of death). The executor commenced the proceeding on June 12, 2015, less than three years after the end of the toll.  Thus, even applying the shorter, three-year limitations period, the proceeding was timely.

When performing a statute of limitations analysis, care must be taken to determine whether a toll is applicable. Aside from the toll provided in CPLR 210(c), a practitioner should consider whether any other toll applies.  Such tolls might include the “insanity” toll provided in CPLR § 208, or the “fiduciary toll” applied in cases such as 212 Inv. Corp. v Kaplan, 44 AD3d 332 (1st Dept 2007).  Continuing undue influence or duress can also operate to toll a limitations period (see Pacchiana v Pacchiana, 94 AD2d 721 [2d Dept 1983]).

[1] The version of this decision that appears on lexis.com erroneously refers to this decision as emanating from the New York County Surrogate’s Court.

[2] The Court’s decision states that the proceeding was brought pursuant to section 2104; it was likely brought pursuant to section 2103.

Many estate practitioners are familiar with litigated matters in which a charity interested in the proceeding is cited, as is the Attorney General, and both the Attorney General and private counsel for the charity appear in the proceeding. In such cases, both the Attorney General and the charity’s counsel represent the charity (although as a practical matter, since the charity has private counsel, the Attorney General may take a less pronounced role in the litigation, electing instead to defer to the charity’s chosen counsel).  What happens, however, when the status and identity of the charitable beneficiary is less than certain?  That was precisely the situation facing the New York County Surrogate’s Court in the probate contest involving the much-publicized estate of Huguette Clark.

Huguette Clark died on May 24, 2011, leaving a Last Will and Testament dated April 19, 2005, which disinherited her family.  However, just six weeks earlier, on March 7, 2005, Huguette executed a will naming her family as residuary beneficiaries.

Article FOURTH of the propounded will directed that the nominated executors form a private foundation to be named the Bellosguardo Foundation and “take all necessary steps to organize, operated (sic) and qualify said foundation as an educational organization, as defined by Section 501(c)(3) of the Code, for the primary purpose of fostering and promoting the Arts.”

In June, 2011, a bare two weeks after Huguette died, and notwithstanding that the propounded will had not been admitted to probate, three entities called the Bellosguardo Foundation were formed — one in California, one in Delaware, and one in New York.

Ultimately, members of Huguette Clark’s family, represented by Farrell Fritz, filed objections to probate.  The New York State Attorney General appeared in the now-contested probate proceeding to represent the charitable interests under the will.  In addition, a private law firm filed a Notice of Appearance in the proceeding, purporting to appear on behalf of an entity called the “Bellosguardo Foundation” (there was no indication which foundation — i.e., the California, Delaware, or New York foundations — the law firm purported to represent).

The probate proceeding was scheduled for trial in September 2013.  There were numerous motions submitted by the various parties in the months preceding the trial.  While most of those motions were evidentiary in nature, one, brought by Farrell Fritz on behalf of the Clark family, sought to strike the private law firm’s Notice of Appearance filed on behalf of the so-called “Bellosguardo Foundation.”  The family took the position that the foundation was not the foundation referenced in the will and, therefore, had no standing to participate in the trial.  Farrell Fritz argued on behalf of the family that the propounded will’s direction regarding the formation of a foundation had no legal effect prior to the admission of the will to probate.  Although the propounded will directed that the executors form a foundation, there were no executors prior to the will’s admission to probate, and, thus, the foundation referenced in the propounded will did not, and could not, exist prior to probate.  That a person incorporated an entity with the same name as the foundation to be formed in the event the propounded will were admitted to probate, and then caused that entity to appear in the probate proceeding, did not make the entity the “Bellosguardo Foundation” to be formed under the will.

Nor was it necessary to permit the foundation to participate in the proceeding, as the charitable interest under the propounded will was being adequately represented by the Attorney-General, who “has the statutory power and duty to represent the beneficiaries of any disposition for charitable purposes (EPTL 8-1.1(f); other cites omitted)” (Alco Gravure Inc. et al. v. The Knapp Foundation, 64 NY2d 458, 465 [1985]).  Moreover, while a charitable beneficiary has standing to participate in a litigated proceeding in which it is interested, the Attorney General’s standing to represent a charitable interest is exclusive where the charity’s status is indefinite or uncertain, or, to express it differently, where the charity is “not within a class of potential beneficiaries that is ‘sharply defined and limited in number’ (Alco Gravure, 64 NY2d at 465).”  (Matter of Rosenthal, [Helmsley Charitable Trust], 99 AD3d 573 [1st Dept 2012]).

Both the Public Administrator of New York County and the Attorney General’s office supported the Clark family’s motion. On the eve of the trial, Surrogate Anderson rendered her decision, granting the motion.  The Surrogate noted that, “[t]he Attorney General, who is charged under the Estate’s Powers and Trusts Law § 8-1.4(e)(2) with representing all charitable interests under the subject will, has been demonstratively adequate and diligent in representing the interests of the Bellosguardo Foundation to be formed.  Further, the Attorney General has exclusive standing to represent a beneficiary of a disposition for charitable purposes when such beneficiary is indefinite or uncertain (EPTL §8-1.1(f))” (Estate of Huguette M. Clark, NYLJ 9/27/13, p. 25, col. 1. [Sur Ct, New York County]).

Subsequently, the parties in the litigation were able to settle the contest.  Thereafter, the true Bellosguardo Foundation was formed, as mandated by the Propounded Will as admitted to probate by the Surrogate.

While the Court of Appeals last year upheld the validity of contingency fee agreements in estate matters, especially in litigation, where it approved contingency fees of over forty million dollars when the actual time spent was a fraction of that value (see Matter of Lawrence 24 NY3d 320 [2014]), a recent New York County Surrogate’s Court case, Estate of Fanny Goldfarb, NYLJ, Oct. 14, 2015, p.22 col.2, confirms that the size of an estate can still be a major factor in determining the reasonableness of a contingent fee, even though the services rendered and the result achieved were exemplary.

In Goldfarb, litigation counsel was retained by the executor to pursue a SCPA 2103 turnover proceeding to recover a co-op apartment that had been transferred to the decedent’s cousin prior to her death.  The fee arrangement was formalized in a written retainer agreement which provided for a contingent fee of one-third of any recovery relating to the transfer of the apartment.  The attorney commenced the proceeding on behalf of executor, and within six months a settlement was reached, whereby the coop apartment was returned to the estate plus $75,000 cash, waiver of a $100,000 bequest, and $6,163 in purported commissions relating to other transfers discovered to have been made to the respondent, which had not yet been brought before the court.

The attorney sought a contingent fee of $251,995, representing one-third of the value of the apartment plus the other monies and waivers recovered. The Attorney General opposed the fee, arguing that it was “extremely excessive.”

Relying primarily on the “size of the estate” criteria enunciated a Matter of Potts, 213 AD 59 (4th Dept 1925), aff’d 241 NY 593 (1925), the court reduced the contingent fee to $115,000, and ordered the attorney to refund the excess without interest.  The court concluded that “such allowance recognizes that the value of respondent’s services outweighs the time he spent in the matter, yet also recognizes that the other factors discussed above do not support a fee that, as the Attorney General notes, would make respondent ‘in effect the major beneficiary of the estate.’”

Fee cases are fact specific. However, contingency fee arrangements are particularly important for smaller estates where a fiduciary may be unable to find counsel who would handle the matter on an hourly basis, and without whom there might be no recovery.

As the year draws to a close, I sometimes recall the stresses of final exam season from my law school days. In the spirit of reminiscence, I’ll pose a quick final-exam-like fact pattern:

Jane owned a parcel of real property in New Hyde Park, title to which she transferred in June 2002 to her irrevocable lifetime trust. Jane listed the New Hyde Park property on Schedule A to the trust agreement, and also executed and recorded a deed transferring the property to her trustees. The trust agreement provides that upon Jane’s death, the remaining corpus of the trust is to be divided among her two children, Nancy and Thomas, in equal shares per stirpes. Nancy and Thomas are specifically named as remainder beneficiaries under the trust agreement.

In February 2013, Thomas predeceased Jane, leaving no spouse or issue, and having no will.

In January 2014, Jane created a will which included a general bequest of all of her real property and her residuary estate to her three grandchildren, Scott, John and Jessica, the children of Nancy.

Jane died in July 2014. At Jane’s death, her irrevocable trust was still in existence and the deed to the New Hyde Park property was still in the name of the trustees of Jane’s trust. Scott sought admission of Jane’s January 2014 will to probate and received preliminary letters testamentary. Assuming admission of Jane’s January 2014 will to probate, who will receive title to the New Hyde Park property?

If you want to cheat, the answer can be found in a recent Nassau County Surrogate’s Court decision, Matter of Wilder (NYLJ, September 3, 2015, p.25, col.6). The crux of the dispute decided by Surrogate McCarty was that both Nancy, as trustee and beneficiary of Jane’s irrevocable trust, and Scott, as preliminary executor and a legatee of Jane’s estate, claimed an interest in the New Hyde Park property.

Nancy asserted that the property was owned solely by the trust and should pass 100% to her. As the trust distribution is to be per stirpes, she referred to EPTL 1-2.14, which provides:

“The property so passing is divided into as many equal shares as there are (i) surviving issue in the generation nearest to the deceased ancestor which contains one or more surviving issue and (ii) deceased issue in the same generation who left surviving issue, if any. Each surviving member in such nearest generation is allocated one share.”

Nancy claimed that the per stirpetal division and distribution should be made at her generation level, as it was the nearest to Jane and contained both surviving and deceased members. Since Thomas did not leave issue, Nancy argued only one share should be created, passing entirely to her as the sole surviving trust beneficiary.

Conversely, Scott asserted that 50% of the New Hyde Park property was owned by Jane at her death and should pass to her grandchildren pursuant to her January 2014 will. Scott claimed that because the trust was irrevocable and the remainder over to Nancy and Thomas was not conditioned upon their survival, a 50% interest in the New Hyde Park property vested immediately and absolutely in Thomas upon transfer of the real property to the trust. When Thomas died, his estate owned that 50% real property interest and it ultimately passed by intestacy to his sole intestate distributee, his mother Jane. Thus, Scott argued, when Jane bequeathed her real estate by her will, this 50% interest in the New Hyde Park property passed to her grandchildren.

Who was right? Neither, party entirely. As with many final exam questions, the fight over interests in the New Hyde Park property was a red herring. The Surrogate clarified that the dispute at issue was properly over a 50% remainder interest in Jane’s trust, not a 50% interest in the New Hyde Park property. Whether Thomas had any interest when he died, it would only have been an interest in the remaining trust property, not the New Hyde Park property transferred to the trust. For example, the New Hyde Park property could have been sold by the trustee and neither Thomas, nor his estate, would have standing to prevent that.

But the question still remained whether Thomas had any remainder interest in Jane’s trust even though he predeceased Jane. Surrogate McCarty noted EPTL 2-1.15 which provides that when the remainder of a trust passes to two or more designated beneficiaries and such remainder provision is ineffective in part, without an alternative disposition, the ineffective portion passes to the remaining designated beneficiaries. Thus, if the trust remainder provision was ineffective as to Thomas, due to his predeceasing Jane, the trust remainder would pass entirely to Nancy as the sole remaining beneficiary. If, however, the trust remainder portion for Thomas vested both immediately and indefeasibly, the trust remainder provision would have been effective despite Thomas’ death, and EPTL 2-1.15 would not apply.

The Surrogate next determined that Thomas’ remainder interest in the trust vested immediately upon the trust’s creation because Thomas was specifically named, and this creates a strong inference of vesting. As for whether the vesting was indefeasible, the words “per stirpes” created a potential condition for defeasance of Thomas’ vested interest, because they indicated Jane’s intent that Thomas’ death might lead to his issue taking his previously vested share. Thus Thomas’ lack of issue became the deciding factor.

The Surrogate rejected Nancy’s interpretation of the per stirpes provision under EPTL 1-2.14. The term per stirpes provides for division among a class of persons, and it is not possible to make a per stirpetal ‘division’ among one person. If Thomas had died with issue, then a class would have existed and a per stirpetal division could have been made. Since Thomas had no issue, the per stirpes provision is not operative. Moreover, the “per stirpes” qualification language in the trust agreement meant that Thomas’ vested interest would only be defeated if Thomas both (1) died before Jane, and (2) died leaving issue surviving him. Since both conditions were not satisfied, Thomas’ previously vested interest in the trust remainder was not defeated by his death. As a result, Thomas’ estate would be entitled to a 50% remainder interest in the trust, which would pass to Jane by intestacy and be disposed of by her will.

How did you score on the exam? More importantly, perhaps, despite the legal logic of the result, do you think this is the result Jane intended? Jane’s property ultimately remained in her family, but would your answer to that final question have been different if Thomas had made a will giving his property to a non-family member? As with most exam-type fact patterns, careful trust drafting could have prevented the dispute.