Generally, where an infant or someone under another disability is a necessary party to an action, it is the parent or guardian of the property who represents him in that action. If the disabled individual has no such guardian, then the court shall appoint a guardian-ad-litem to represent his interests (see CPLR 1201). It is the appropriate guardian who will have the authority to enter into a stipulation of settlement on behalf of the incapacitated individual, but he or she must seek court approval of said agreement by motion pursuant to CPLR 1207 prior to its becoming enforceable.
Particularly relevant to the trusts and estates practitioner, the corresponding procedure in Surrogate Court is very similar. Pursuant to SCPA 315, an adult competent party who has a similar economic interest to another necessary party who suffers from a disability (i.e., an infant) may represent the latter by virtual representation. However, the statute restricts virtual representation to court proceedings and informal accounts, and thus, it does not apply with respect to a typical out of court settlement. Instead, where an individual under a disability is a necessary party to a settlement agreement that falls outside of SCPA 315, the parties must file a compromise proceeding pursuant to SCPA 2106.
Pursuant to SCPA 2106, a compromise proceeding requires the petitioner to outline for the court the facts that caused the dispute, identify the various disagreeing positions and the interests of the parties, and establish the necessity for court approval of the agreement. A guardian-ad-litem will then be appointed to represent the interests of the infant or other individuals under disabilities, and it is his responsibility to determine whether the proposed settlement is in the best interests of his ward(s). If it is, then the guardian-ad-litem must obtain authority from the court to enter into the settlement. However, it is only if the court deems the relief obtained through the settlement to be “just and reasonable,” that it will enter the requisite final decree binding on all interested parties, including those under a disability. (see Charles F. Gibbs and Colleen F. Carew, Surrogate’s Practice and Proceedings: SCPA 315 and Out-of-Court Settlements: Risk v. Reward, New York Law Journal, Nov. 6, 2006).
Although SCPA 2106 and CPLR 1207 provide vehicles by which necessary parties who are under a disability can be bound by a settlement, these statutes create additional hurdles to creating enforceable stipulations. Indeed, the proposed agreement may be rejected by the guardian-ad-litem, his or her appointment may result in the filing of objections, or the court may not find the agreement to be “just and reasonable.”