As parties prepare for trial before the Surrogate’s Court, a question that oftentimes arises is whether the parties have a right to a trial by jury. The right to a jury trial is anything but universal in Surrogate’s Court proceedings, and, in fact, does not exist in a proceeding concerning the removal of a fiduciary. This blog post explains why no right to a jury trial exists in a Surrogate’s Court removal proceeding.

The Surrogate’s Court Procedure Act (“SCPA”) provides that a party is only entitled to a jury trial in a proceeding “in which any controverted question of fact arises as to which [the] party has a constitutional right of trial by a jury, in any proceeding for the probate of a will in which a controverted question of fact arises, and in any proceeding commenced after the death of the creator of a revocable lifetime trust to contest the validity of such trust in which a controverted question of fact exists” (see SCPA § 502[1]). Under Article 1, Section 2 of the Constitution of the State of New York, a constitutional right to a jury trial only exists in those “cases in which it has heretofore been guaranteed by constitutional provisions” (see N.Y. Const. Art. 1, § 2; Matter of Mastro’s Will, 100 Misc2d 866, 867 [Sur Ct, Suffolk County 1979] [citations omitted] [“The result of (that) constitutional provision, enacted in 1938, is that the constitutional guarantee of a jury trial continues only to the degree that such jury trials were authorized prior to the 1938 Constitution”]).

Based upon the foregoing, in Matter of Ruggiero, the Second Department held that a party did not have a right to a jury trial in a removal proceeding (see Matter of Ruggiero, 51 AD2d 969, 969-71 [2d Dep’t 1976]). There, the petitioner sought a trial by jury in the proceeding she commenced to remove the decedent’s sister as the fiduciary of the decedent’s estate (see id.). The Surrogate’s Court and Appellate Division both found that a jury trial was unwarranted, mindful that there is no right to a trial by jury in a removal proceeding under the New York State Constitution or the SCPA (see id.).

In light of the foregoing, a party preparing for trial in a Surrogate’s Court removal proceeding should plan to proceed before the Surrogate. Such a party does not have a right to have its trial heard by a jury.

Although one of the many duties and responsibilities of an executor is to marshal and appraise estate assets, and, depending upon the dispositive terms of the governing instrument, liquidate them for purposes of distribution, the fulfillment of these duties may, at times, result in fiduciary liability. In Matter of Billmyer, 142 AD3d 1000 (2d Dept 2016), the Appellate Division, Second Department, considered this issue, in an appeal from an Order of the Surrogate’s Court, Kings County (Lopez Torres, S.), which surcharged the executor for selling certain real property of the estate below fair market value.

The decedent died with a brownstone residence, located in Brooklyn, New York, valued at approximately $1.5 million. In her Will, she named four Lutheran charities and Adelphi University as residuary beneficiaries of her estate.

Two years after the decedent’s death, the executor entered a contract for the sale of the Brownstone residence to an acquaintance of his for the sum of $670,000. Prior to the closing, the purchaser assigned his rights under the contract to an LLC, and the sale was consummated shortly thereafter between the estate and the LLC. Three days after this sale, the LLC sold the subject property to an unrelated third party for the sum of $1,300,000, pursuant to the terms of a contract dated one month prior to the date of the contract that it had entered with the estate.

The executor then accounted, and objections were filed by the charitable beneficiaries and the Attorney General of the State of New York, as the statutory representative of the charities. Following depositions, Adelphi University and the Attorney General moved for summary judgment determining that the sale of the real property was for less than its fair market value, and surcharging the executor accordingly. The executor opposed, alleging that the property required extensive repairs prior to its initial sale, albeit without an explanation as to how the property resold three days later for almost twice the price. The Surrogate’s Court granted the motion, and surcharged the executor in the sum of $630,000, plus 6% interest from the date of the estate’s sale to the date of remittance.

The Appellate Division affirmed, opining that in performing his fiduciary duty, the executor was required to employ good business judgment. Further, the Court explained that to the extent the executor failed to satisfy this standard in the sale of estate property, he could be surcharged. However, the Court cautioned that a surcharge did not result simply upon a showing that the estate fiduciary did not obtain the highest price obtainable for an asset. Rather, it had be demonstrated that the executor “acted negligently, and with an absence of diligence and prudence which an ordinary [person] would exercise in his [or her] own affairs” (Billmyer, citing Matter of Lovell, 25 AD3d 386, 387 [2d Dep’t 2005]).

Within this context, the Court noted that the executor chose a real estate agent for the sale of the brownstone, who was based in Staten Island, had no knowledge about the Brooklyn real estate market, and did not actively market the property for sale. Moreover, the record indicated that the executor did not obtain an appraisal of the property at the time of sale or learn the fair market value of comparable properties, failed to visit the property for an extended period of time prior to sale, and was unaware of how the property was being marketed.  In addition, he sold the property to an acquaintance of his, when there was an unrelated third party ready and willing to buy the property for nearly double the price paid by the LLC.

In view thereof, the Court found that the objectants had established, prima facie, that the executor had breached his fiduciary duty and acted negligently with respect to the sale of the property. Further, it concluded that the executor had failed to submit evidence in opposition sufficient to raise a triable issue of fact. Finally, the Court held that the Surrogate’s Court had properly exercised its discretion in awarding interest upon the surcharge, based upon proof that three days after the executor had sold the property, it was resold for nearly twice the original purchase price.

A nominated executor is obliged to secure estate assets even before the issuance of letters testamentary, or preliminary letters testamentary (see Matter of Schultz, 104 AD3d 1146 [4th Dept. 2013]).  Courts have recognized that “an executor’s duties are derived from the will itself, not from the letters issued by the Surrogate” (Estate of Skelly, 284 AD2d 336 [2d Dept. 2001]).  Thus, as we have noted in a prior post, executors have been subject to surcharge for a loss sustained to estate property in the period between the decedent’s death and the executor’s receipt of letters from the Surrogate’s Court (see, e.g., Matter of Donner, 82 NY2d 574 [1993] [surcharging nominated executors for investment losses based on date of death values]; Matter of Kranzle, N.Y.L.J. 11/7/1991 p. 28, col. 1 [Sur Ct, Suffolk Co.] [surcharging nominated executor for interest and penalties on taxes due several months after decedent’s death, but before the probate proceeding commenced]).

Decisions addressing a nominated executor’s obligations in respect of estate assets before formal appointment by the Court usually arise from the fiduciary’s failure to act. A recent case, however, addressed the nominated executor’s obligations not in the context of an omission, but, instead, involved the fiduciary’s expenditure of funds to safeguard property that ended up not being estate property (Matter of Timpano (Brough), 2016 NY Slip Op 51770(U) [Sur Ct, Oneida Co.]).  Although the nominated executor’s actions may have been misdirected, the Surrogate permitted an allowance from the estate for these expenses as the actions were undertaken in good faith and, further, the Court cited the need to avoid deterring other nominated executors from taking immediate measures to safeguard estate property.

In Estate of Skelly, supra, the fiduciary was notified at the decedent’s funeral in May 1995 that she had been named executor.  It was undisputed that she failed to probate the will until November 1996, over one year after decedent’s death.  During that time, decedent’s real property, which was bequeathed under the will, was vandalized and damaged.  The person to whom the property was bequeathed sought damages for the loss.

The Surrogate denied the executor’s motion for summary judgment dismissing the objections, and the Second Department affirmed.  Even though title to the real property may have vested with the objectant on the death of the decedent, the Second Department found “there are issues of fact as to whether the [executor] failed to assess the assets of the estate and neglected to preserve the premises prior to probate.” (Skelly, 284 AD2d at 337).

In Timpano, the decedent’s sister, Georgianna, lived in a mobile home in Florida across the street from one in which decedent resided. Decedent died in April 2010 survived by his three children, Mark, Kelly and Robert. His will named Georgianna as executor.

Probate of decedent’s will was delayed by SCPA 1404 examinations and, following the testimony of one attesting witness, Georgianna withdrew her probate petition. Ultimately, the Oneida County Chief Fiscal Officer (the “CFO”) was appointed as administrator of the estate.

Believing decedent owned the mobile home in which he lived, beginning in April 2010 (the month of decedent’s death), Georgianna used her personal funds to pay lot rent to avoid confiscation of the mobile home and its contents. She further paid for electrical service to run the air conditioning to avoid mold and mildew so as to further protect the mobile home and decedent’s possessions therein. At no time did any of decedent’s children object to her covering these expenses.

In January 2011, decedent’s son Robert informed Georgianna that he had searched the title to the mobile home and found that his name was on the title. Upon learning this, Georgianna removed the decedent’s possessions from the mobile home and placed them in storage. She further stopped paying lot rent and electric bills.

When the CFO submitted its final accounting, decedent’s daughter Kelly objected to Georgianna being reimbursed for the expenses for lot rent and electric service. Kelly testified in support of her objections and, significantly, acknowledged that she too believed the mobile home was estate property before being told otherwise in January 2011

The Surrogate found Georgianna’s actions following decedent’s death evidenced her understanding that a nominated executor has an obligation to secure assets of an estate prior to formal appointment, citing Schultz, supra. Even though the will was not ultimately admitted to probate, the Surrogate noted, “Georgianna would have had no basis to anticipate this outcome when she acted to preserve decedent’s assets throughout 2010 and into early 2011.”

The Surrogate recognized that Kelly’s claim that if the estate did not own the property, it could not be responsible for related expenses, is true in a technical sense. The Surrogate, however, noted that to rule in Kelly’s favor would ignore the circumstances of the case.

After reviewing the cases holding that an individual who expends personal funds in good faith in furtherance of her fiduciary responsibilities is entitled to reimbursement, the Surrogate found Georgianna acted in good faith and should be entitled to reimbursement from the estate.[1] The Court reinforced its decision by reference to the following policy consideration: “to sustain the objections would be to instill a chilling effect on the work of nominated executors who are tasked with preserving an asset believed in good faith…to belong to the estate” (Timpano, supra).



[1] The Court directed that part of the expenses be charged against Robert’s share of the estate.

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 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.

A recent decision of the Richmond County Surrogate’s Court addressed a frequently litigated issue in Surrogate’s Court litigation – – whether the proposed or nominated fiduciary should be disqualified from serving in a fiduciary capacity on the grounds of “dishonesty” or “improvidence.” In the Estate of George Mathai a familiar dynamic was in play – – there was a dispute between the decedent’s children from a prior marriage and the decedent’s surviving spouse. The decedent’s two children from a prior marriage objected to the appointment of their step-mother as Administrator of the decedent’s estate. They claimed that she was unfit to serve as fiduciary on the grounds of dishonesty, hostility, and improvidence.

At the outset, the court noted that the decedent’s surviving spouse was first in the order of statutory priority to serve as Administrator under SCPA §1001(a). However, the statute gives parties interested in a decedent’s estate the opportunity to object to the appointment of a fiduciary, where the fiduciary “does not possess the qualifications required of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or…is otherwise unfit for the execution of the office.”

With the decedent’s children objecting to the appointment of their step-mother, the question became what, in this context, do the statutory terms “dishonesty,” and “improvidence” mean?

Addressing “dishonesty,” the Surrogate explained that in order to prove that a potential fiduciary is dishonest “it must be shown that the person has a tendency or ‘habit of mind’ toward wrongful action.”   An act of isolated wrongdoing is not enough to disqualify a fiduciary from serving on the basis of “dishonesty.” It must be shown that there was dishonesty in money matters to such an extent that it would lead to a reasonable apprehension that the estate would not be safe.

Addressing “improvidence” the court quoted earlier decisions where it was observed that “the quality of being improvident does not necessarily involve moral turpitude,” and that defined improvident acts as those that “would be likely to render the estate unsafe and liable to be lost or diminished.” The court further explained that misappropriation or mishandling of the decedent’s property falls within the meaning of improvidence.

In the Estate of George Mathai, the decedent’s children could not meet their burden of showing dishonesty or improvidence to disqualify their step-mother. Additionally, while they claimed that their step-mother should not be appointed on the grounds of hostility, the court dismissed their objection, repeating the rule that mere hostility between the fiduciary and the beneficiaries is not grounds for disqualification; hostility will only serve as a basis for disqualification where it jeopardizes the proper administration of the estate.

In this regard, it is worth noting that courts are mindful of beneficiaries or distributees seeking to impose their preference of fiduciary contrary to the testator’s choice of fiduciary (or contrary to the statutory order of priority) through their own misconduct. In this regard, beneficiaries are not permitted to bootstrap their own unreasonableness, hostility, and misconduct into a claim for disqualification or removal on the grounds of friction and hostility. As the New York County Surrogate’s Court has pointed out:

Courts are also loathe to indulge a beneficiary’s wish to dictate, at will or at whim, who the fiduciary should or will be. After all, where there is a clash between beneficiary and fiduciary, it is the latter who faces the potential for liability; it may be presumed therefore that the prospect of a surcharge will chasten the fiduciary to try to do right on an issue as to which the beneficiary him/herself is free to be wrong. As a corollary, a beneficiary should not be allowed to bootstrap his or her way to a new fiduciary by intentionally antagonizing the current fiduciary.

A donor writes in a pledge amount, signs the pledge card, hands it over to the charity, and is absolutely committed to that amount; end of story, right?  Not necessarily.  A recent case emanating from Kings County Surrogate’s Court, Matter of Kramer, N.Y.L.J. April 21, 2014, p. 24 (col. 6), shows that certain charitable pledges may not be as binding as they appear on paper.  The case provides an excellent primer on the operation of specific charitable pledges under the theory of unilateral contracts, and serves as a stark reminder to charities that to have the right to enforce a pledge that they must do more than just secure a signature on a pledge card.  The case also underscores to estate administrators the importance of scrutinizing and potentially challenging seemingly credible claims against an estate.

Kramer involved a motion by a charity, Educational Institute Oholei Torah-Oholei Menachem, for summary judgment dismissing objections to its petition to determine the validity and enforceability of its claim against the estate of Isaac Kramer.  The charity’s claim was based upon a pledge card and promissory note, in the face amount of $1,800,000, allegedly signed by the decedent approximately a year and a half before his death, and ostensibly payable six months prior to the decedent’s death.  The pledge was allegedly given for the purpose of supporting a building campaign proposed by the charity to construct a new ritualarium, or mikveh, for use of the charity’s members.  No payment on the pledge had been made by the decedent or demanded by the charity prior to the decedent’s death.  Representatives of the charity claimed they consciously withheld demands for payment because of the decedent’s illness shortly before his death.

Objections to the charity’s petition were filed by each of the Kings County Public Administrator, as fiduciary of the decedent’s estate, and four additional groups representing various purported testamentary legatees and distributees.  The respective objections raised multiple theories for rejection of, and affirmative defenses against, the charity’s claim including (i) forgery of the decedent’s signature, (ii) lack of due execution, (iii) lack of consideration, (iv) lapse upon the decedent’s death, (v) laches and unclean hands, (vi) expiration of the statute of limitations, (vii) fraudulent inducement, and (viii) the decedent’s lack of capacity.  Upon the charity’s summary judgment motion, two of the respondents cross moved for summary judgment upon an additional theory of the charity’s failure to demonstrate acceptance of the pledge by taking action in reliance thereon.

The Court granted the charity’s motion for summary judgment concerning the objections based upon lack of due execution, laches, unclean hands, expiration of the statute of limitations, and fraudulent inducement, because none of the respondents supported or addressed these objections in their responsive papers.  Thus, these objections were deemed abandoned.  The Court also found that no triable issue of fact was raised concerning the decedent’s capacity, and that the burden of proving the decedent’s incompetence was not met.  Accordingly, the charity’s motion for summary judgment was granted concerning the objections based upon capacity.  The charity also prevailed concerning objections based upon forgery of the decedent’s signature, as the Court found that the handwriting analysis report raised no triable issue of fact concerning its genuineness.

The final objection considered by the Court, lack of consideration, however, turned out to be dispositive against the charity.  It was clear from the facts and on the face of the pledge that it was made in furtherance of a specific purpose, namely a building project, rather than for the charity’s general educational and religious work.  As such, the Court noted that the pledge must be examined under the theory of a unilateral contract.  Under this theory, the signed pledge card is not the contract itself, but merely an offer to make a contract which the charity must then accept by taking action in reliance upon the offer.  The pledge, then, will not become binding until the charity has sufficiently acted upon the pledge so as to incur liability on the part of the donor. 

The Court stated that it has been the “noted policy of the courts to sustain the validity of subscription agreements whenever a counter promise of the donee can be sustained from the actions of the parties or it can be demonstrated that any legal detriment has been sustained by the promise in reliance upon the promised gift.”  For instance, charitable subscriptions have been deemed enforceable where the donee has made some substantive progress towards the charitable goal for which the pledge was made.  This would include starting construction, employing architects and paying for plans, raising additional pledges based upon the disputed pledge, or taking on a construction loan for the project.  The donor’s partial payment of the pledge, whether alone or in conjunction with concrete action on the part of the charity, has also been deemed sufficient to indicate acceptance of the unilateral contract.

Despite this broad policy in favor of enforcement, the charity in Kramer was unable to meet the burden to show that it had meaningfully acted in reliance upon the pledge.  Indeed, it was undisputed that no actual construction had begun on the proposed building project.  Nor was there any specific date upon which construction was to begin, or any reasonable timeframe for completion of the project.  The Court characterized the construction project as more of a “hoped-for occurrence” than an actual plan.  Moreover, despite its claims to the contrary, the charity could not prove that it had expended any sums of money on any construction related expenses, such as soil samples or architectural plans.  Nor could the charity produce any contracts or engagement letters from architects, engineers, or contractors.  There was also no proof of building permit or zoning applications.  Finally, though the charity claimed to have used the decedent’s pledge to solicit other pledges, no independent evidence of receipt or fulfillment of such additional pledges was offered.  In sum, the Court found that the charity had done nothing meaningful or substantive in reliance on the decedent’s pledge.  Thus, the charity’s motion for summary judgment on the consideration issue was denied and the cross-motions dismissing the charity’s petition were granted.

 The Kramer case should serve as a useful guide for charities in satisfying the requirements for establishing enforceability of specific charitable pledges.  It also gives estate administrators helpful factors to look for when challenging charitable pledges

Sometimes language contained in wills and trusts can be misleading to the lay person. 

For example, while they are good for a chuckle, provisions in wills that unequivocally and forcefully direct the executor to hire a certain lawyer in connection with the testator’s estate’s administration are unenforceable.  Who would believe that such will provisions usually direct that the executor hire the lawyer who drafted the will?

As my colleagues explain, “exoneration clauses,” which are provisions in wills and trusts that purport to provide ironclad insulation from liability to an executor or trustee, are “not all they are cracked up to be.” 

What about a trust that grants the trustee “absolute discretion” to make distributions?  What do those words mean to a beneficiary who is seeking a distribution?

As the New York County Surrogate’s Court held in Matter of Hammerschlag, NYLJ April 26, 2013 at p.37, the broad grant of  absolute discretion to a trustee to make distributions is “not unbounded.”   The court explained the well-settled law that a court is empowered to review the exercise or non-exercise of a discretionary power (such as the absolute discretion to make distributions of principal and income from a trust) conferred upon a trustee so as to prevent any abuse in the exercise of that power. 

In Hammerschlag, a beneficiary of a trust sought to compel trust distributions.  The beneficiary alleged that she was in dire straits, homeless and with no means of support.  She asserted that the trustee improperly exercised his absolute discretion when he declined to make distributions.  Specifically, the beneficiary argued that the trustee merely relied on information (or misinformation) received from her estranged mother in deciding whether to make distributions – that he acted arbitrarily and without appropriate inquiry into relevant circumstances.  The trustee argued that he was acting in good faith and desiring to preserve trust assets, guarding against the beneficiary’s improvidence.  The court scheduled a hearing on the issue of whether the trustee failed to exercise his independent judgment or adequately evaluated the beneficiary’s needs in good faith before exercising his absolute discretion and refusing to make distributions. 

Matter of Mark, C.H., 83 Misc 3d 363 (Sur Ct, New York County 2012), provides an example of what the New York County Surrogate’s Court viewed as an indefensible attempt to rely on the broad grant of “absolute discretion.”  In that case, at trust beneficiary was one of the most vulnerable among us, suffering from profound disabilities.  There, Court first observed that the trust at issue empowered the trustees with absolute discretion to withhold or pay out income, and, in the event of an income shortfall, to pay trust principal for the “care, comfort, support and maintenance” of the beneficiary and his descendants. Then the Court found as follows:

The trustees left [the beneficiary] to languish for several years with inadequate care, despite the fact that the [trust] had abundant assets. In so doing, the trustees failed to exhibit a reasonable degree of diligence toward [the beneficiary]. Courts will intervene not only when the trustee behaves recklessly, but also when the trustee fails to exercise judgment altogether (“even where a trustee has discretion whether or not to make any payments to a particular beneficiary, the court will interpose if the trustee, arbitrarily or without knowledge of or inquiry into relevant circumstances, fails to exercise the discretion”) (citation omitted). That is, sadly, precisely what occurred here.

 Absolute discretion is the broadest grant of discretion, and courts are deferential to a trustee’s exercise of such discretion– courts do not lightly substitute their own judgment for that of a trustee.  However, in exercising absolute discretion, a trustee must not act arbitrarily, but must use his judgment and act in good faith with knowledge of or inquiry into relevant circumstances.  In a case like Hammerschlag,  the trustee’s decision-making process is critical.  Was the decision to decline to make distributions arbitrary or the result of a process of consideration and the exercise of the trustee’s independent judgment, or was it arbitrary and made without consideration or inquiry? 







A recent post to this blog discussed a case in which a court declined to remove a fiduciary based on allegations of a potential conflict of interest, but in the absence of actual misconduct on the part of the fiduciary. While it is certainly rare for a court to remove a fiduciary in the absence of actual misconduct, it is still rarer for a court to do so on its own initiative, i.e., sua sponte. But that is precisely what happened in Matter of Young decided earlier this year by Nassau County Surrogate Edward W. McCarty III.


The decedent, Joseph Young, was an acclaimed lyricist of the early 20th Century, having written such classic songs as “I’m Gonna Sit Right Down and Write Myself a Letter,” “Dinah,” and “I’m Sitting on Top of the World.” He died in 1939, intestate, survived by his wife, Ruth Young, and his father, Samuel Young.  Pursuant to the law of intestacy applicable at the time, Ruth and Samuel were the decedent’s only distributees.  Ruth was appointed administrator of the decedent’s estate in 1939 (and she died in 1973).


Fast forward 70 years. 


In 2009, Nicholas Al Young, allegedly the Decedent’s grandnephew, petitioned the court for letters of administration de bonis non.   (An administrator de bonis non or “d.b.n.” is a successor administrator appointed to administer estate property not yet administered.) Nicholas’s petition alleged that the decedent was not survived by either a spouse or a parent, and that his distributees included 22 nephews/nieces and great-nephews/great-nieces.  He alleged that the value of the assets in need of administration was $9,000. The Court issued letters to Nicholas.


In 2012, Rytvoc Inc. and Warock Corporation — the alleged owners of copyrights in various musical compositions written by the Decedent — commenced a proceeding to revoke Nicholas’s letters.  (In the interest of full disclosure, Farrell Fritz represented Rytvoc and Warock in the proceeding.) Rytvoc and Warock alleged that Nicholas, armed with his letters of administration, was wrongfully interfering with their ownership of the copyrights by attempting to enforce termination rights allegedly available under Federal law.  They sought his removal pursuant to SCPA § 711(4), which provides for the revocation of letters obtained “by a false suggestion of a material fact.” Specifically, they alleged that Nicholas was ineligible for letters; that he obtained them only by virtue of his misrepresentation that the decedent was not survived by a spouse or a parent; that the individuals identified in the petition were not the decedent’s distributees; and, finally, that no administrator was necessary in any event, because the estate had no rights in the compositions for a fiduciary to exercise.


Nicholas moved to dismiss Rytvoc and Warock’s petition for lack of standing.  He argued that SCPA § 711, which governs removal proceedings, confers standing only on “a co-fiduciary, creditor, person interested, any person on behalf of an infant or any surety on a bond of a fiduciary.” Rytvoc and Warock, Nicholas argued, were only “adverse parties in possible future litigation over the ownership of copyrights.” Rytvoc and Warock argued that, in fact, they were creditors of the estate, having filed a claim for damages resulting from Nicholas’s alleged wrongful interference with their intellectual property rights. The Court rejected that argument, however, and dismissed the petition for lack of standing.


But the song continues.


Rytvoc and Warock argued, alternatively, that the issue of standing was a “red herring” because the Court had the authority pursuant to SCPA § 719, and the inherent authority, to revoke Nicholas’s letters. Section 719 provides, in relevant part, that a court may revoke, suspend, or modify letters it issued; it may do so sua sponte, without a petition or the issuance of citation, in certain circumstances, including when any facts provided in SCPA § 711 are brought to its attention. As previously noted, section 711(4), provides for the revocation of letters obtained “by a false suggestion of a material fact.”


The Court began its analysis by reviewing the law governing revocation of  letters obtained through misrepresentations, noting that a fiduciary’s removal is appropriate even where the alleged misrepresentation was made inadvertently and without an intent to defraud the court. It concluded, therefore, that “ it is not necessary for the court to ascertain whether Nicholas made the error in bad faith.” (Although it noted that “it appears from the court file that Nicholas did not attempt to deceive the court as to the fact that Ruth Young survived the decedent. Nicholas provided the court with numerous documents evidencing Ruth’s date of death.”)


The Court then reviewed the statutory framework governing letters of administration d.b.n., to determine whether Nicholas was eligible for letters. It explained in this regard that SCPA§ 1001 (made applicable to administrators d.b.n. by section 1007) requires that letters be issued to the distributees of an intestate decedent, or, if deceased, to their fiduciaries, or to any eligible “person who is not a distributee upon the acknowledged and filed consents of all eligible distributees, or if there are no eligible distributees, then on the consent of all distributees” (SCPA § 1001[6]).  It also explained that, pursuant to SCPA § 1001(8), where letters are not granted as set forth above, they are properly granted in the following order to: (a) the public administrator, (b) the petitioner, in the court’s discretion, or (c) to any other person or persons. 


The Court stated that it “has an obligation to make sure that the proper person is administering the estate.”  It concluded that “[i]t is unclear whether the proper person is administering this estate.” The Court also expressed its concern regarding the petition’s allegation that the value of the Decedent’s assets in need of administration was only $9,000, stating that “[t]he court is concerned that this figure is underestimated as it appears the decedent was a successful songwriter whose estate consisted of royalty interests which may be of a greater value than indicated given the possible copyright battle.”


The Court revoked Nicholas’s letters “[b]ased upon such concerns and due to the misstatement in Nicholas’ petition. . . .” It issued letters of temporary administration to the Public Administrator, directing that it “attempt to identify the fiduciaries of Ruth Young’s estate and Samuel Young’s estate who have a prior right to letters of administration de bonis non and to ascertain the value of the assets in need of administration.”


The moral of the story is that those seeking appointment as fiduciaries must take great care to ensure the accuracy of the allegations of their petition. A mistake, even one alleged to be innocent, could prove costly.


“A testator’s choice of executor should be given great deference” (see Matter of Palma, 40 AD3d 1157, 1158 [3d Dept 2007]). This rule is fundamental to the practice of trusts and estates law, yet is often challenged by those who want to disqualify or remove the testator’s nominee -with or without valid basis. 

A court will generally issue letters to the nominee who is deemed eligible to serve as a fiduciary pursuant to SCPA §707, unless an interested party makes legitimate objections to the appointment as set forth in SCPA §709. Once letters do issue, removal is a very serious proposition, but it can be achieved if the fiduciary’s conduct falls within the realm of SCPA §711 – including but not limited to wasting or imprudently investing estate assets, acting dishonestly, refusing to obey a court order, or failing to have the necessary qualifications because of “substance abuse, dishonesty, improvidence, want of understanding,” or is “otherwise unfit to serve” (see SCPA §711). Courts may also take the more drastic measure of removing a fiduciary without process under certain circumstances, such as failing to account or refusing to supply information about estate assets despite court orders to do so, being convicted of a felony or judicially declared incompetent, or commingling estate funds with his or her own (see SCPA §719). In all events, however, courts tend to exercise their powers to remove fiduciaries somewhat sparingly.

It is against this backdrop that Matter of Russo, 100 AD3d 1547 (4th Dept 2012), should be considered. There, objections to probate were filed alleging that the petitioner, to whom preliminary letters had already issued, should be disqualified from serving as executor due to a purported conflict of interest “in connection with decedent’s interest in Tread City Tire, Inc. (“TCT”) and decedent’s classic car collection.” 

Regarding TCT, it was alleged that a conflict of interest arose from the decedent’s purported ownership interest in the entity, where petitioner also happened to be a salesperson. With respect to the decedent’s classic car collection, it seems that the purported conflict was asserted because one of the cars was bequeathed to the petitioner – but the Court did not elaborate much on this latter allegation. 

Petitioner moved for summary judgment seeking dismissal of the objections, arguing that no conflict existed. In support of the motion, petitioner provided corporate tax returns for TCT along with a third party affidavit, to prove that the decedent had no ownership interest in the entity; rather, it was fully owned by a third party, and the decedent merely managed the business. 

Moreover, with respect to the allegations of conflict in connection with the classic car collection, petitioner established that while one car was specifically bequeathed to him, he obtained two appraisals for each car, and two of the cars were sold at prices higher than the appraised price. In addition, petitioner demonstrated that the remaining classic cars were placed in a consignment program with objectant’s consent.

Citing the well-established law giving deference to a testator’s choice of fiduciary absent evidence of his or her actual misconduct, the court granted the petitioner’s summary judgment motion, dismissing the objections to his serving as executor. The court opined that objectant had failed to raise any issue of fact as to whether there had been any actual misconduct, explaining that the objectant did not make even one specific allegation of conflict or misconduct.

Accordingly, in view of the great deference given to the testator’s selected fiduciary, this case serves to reiterate the longstanding rule that actual misconduct is the key to the disqualification of a fiduciary; potential misconduct is not enough. Nonetheless, it should be noted that this is not an ultimate roadblock for a beneficiary who has legitimate concerns about the fiduciary’s ability to serve. Indeed, if the fiduciary subsequently displays one or more of the characteristics set forth in SCPA §711 or SCPA §719 as explained above, then he may be removed for cause during the course of his stewardship.


            The term “adopted-out” child, commonly used by the courts, refers to a child adopted out of his or her biological family, i.e., a child placed for adoption by his or her biological family. A detailed discussion of the inheritance rights of adopted-out children is available here. Recently, in a case of first impression, Matter of Svenningsen, the Appellate Division, Second Department, addressed the inheritance rights of a child adopted by the decedent (prior to his death, of course) and his spouse, but subsequently re-adopted out to another family eight years after the decedent’s death.


The child, Emily, was born in China on July 7, 1995. The decedent, John Svenningsen, and his wife, Christine, formally adopted Emily in 1996. They entered into a Chinese adoption agreement in which they guaranteed that they would deem Emily to be their biological child; that they would not transfer or have her re-adopted; and that Emily had a right to inherit from their estates. 


The decedent died on May 28, 1997, survived by Christine, five biological children, and Emily. He left a Last Will and Testament dated March 17, 1997 (which was admitted to probate in July of that year), as well as two irrevocable inter vivos trusts for his children, dated July 20, 1995, and October 29, 1996. 


In the 1995 trust, created prior to Emily’s adoption, the decedent directed the division of the trust assets equally among his children, when the oldest child reached the age of 30.  The trust defined the term “children” to include the decedent’s four living children (the fifth had not yet been born), identified by name, “and any additional children born to or adopted by [the decedent] after the creation of this Trust.”


The 1996 trust established six equal and separate irrevocable trusts, one for each of the decedent’s children.  Each child, including Emily, was expressly named as a beneficiary.  The trust instrument identified Emily as the sole beneficiary of her separate irrevocable trust, denominated as “The Emily Fuqui Svenningsen Trust.”


The decedent’s Will created two testamentary trusts – a credit shelter trust and a marital trust. The credit shelter trust was for the benefit of the decedent’s “then living issue, per stirpes. . . .” The marital trust was to be funded upon Christine’s death for the benefit of the decedent’s “then living issue, per stirpes. . . .” The Will defined the term “issue” as including “children who have been legally adopted at the date of my death as well as children with respect to whom legal adoption proceedings had been commenced prior to the date of my death though not completed at the time of my death.” 


In 2003, approximately six years after the decedent’s death, Christine enrolled Emily in a school for children with special educational needs. Christine’s attorneys contacted school administrators, inquiring about putting Emily up for adoption. Ultimately, Maryann Campbell, a school official, and Fred Cass, her husband (for ease of reference, the “Petitioners”), agreed to adopted Emily. Christine terminated her parental rights with respect to Emily in 2004. The re-adoption was consummated in 2006 by court order. When they adopted Emily, the Petitioners were unaware of the provisions of the decedent’s will or trusts, although they were ultimately advised that the decedent had arranged money for Emily’s education and medical needs. 


In November, 2007, Christine’s financial advisor requested the Petitioners’ consent to separate Emily’s interest in the decedent’s estate from those of the decedent’s biological children, through the creation of a spray trust. In connection with that request, the advisor provided the Petitioners with a list of estimated values of estate assets, and estimated Emily’s interest in the trusts at $842,397. Ultimately, the Petitioners examined the files of the Westchester County Surrogate’s Court and learned that the decedent’s estate had an estimated value, on the estate tax return, of $250,000,000. The Petitioners commenced proceedings seeking to compel accountings with respect to Christine’s administration of the decedent’s estate, and with respect to the 1995 and 1996 trusts.


The respondents in each of the proceedings asserted affirmative defenses based on Emily’s alleged lack of standing. The Petitioners moved for summary judgment compelling the accountings and the respondents cross-moved for summary judgment dismissing the petitions.  Among other things, respondents argued that Emily’s contingent interests in the trusts were extinguished upon adoption.  The Surrogate’s Court, Westchester County, granted the Petitioners’ motion and denied respondents’ cross-motion. The court directed the respondents to account. An appeal ensued.


The Second Department affirmed, in a decision authored by Justice Leonard B. Austin.


The court began its analysis with a review of the law concerning the inheritance rights of adopted and adopted-out children, including a detailed discussion of Domestic Relations Law § 117 and Estates, Powers and Trusts Law 2-1.3. It then turned to the Court of Appeals’ decision in Matter of Best, 66 NY2d 151 [1985]). At issue in that case was the right of an adopted-out child to inherit from his biological maternal grandmother. The Court held that, absent a contrary indication in the will, an adopted-out child is not entitled to share in a class gift to issue in the will of a biological relative.  The Appellate Division explained that Best “remains relevant for the policy considerations enunciated in support of termination of an adopted-out child’s right of inheritance.”


The court summarized the issues before it as “whether the decedent expressly intended to include Emily as a beneficiary under the subject trusts and whether Emily’s interest in those trusts vested prior to her being adopted by the petitioners.” The court answered both those questions in the affirmative.


First, as to the decedent’s intent, the court noted that Emily was expressly named in the 1996 trust; and although she is not mentioned specifically by name in the Will or in the 1995 trust, “she is plainly referred to by status in both instruments” — referring to definitions of the  term “issue” in the trust instrument and in the Will. The court rejected respondents’ argument that the court should dismiss as “mere surplusage” the inclusion of adopted children in the definition of “issue.” In sum, the court concluded that


Emily’s adoption by the petitioners did not, and was not intended to, terminate her interest in the Marital Trust or the 1995 Trust.  The decedent expressed an intention to include his adopted child in the absence of any reason to believe that his status as the parent of Emily would be terminated by her subsequent adoption many years after his death.  Further, at the time of the decedent’s death, Emily was not an “adopted-out” child but instead was, and remained, his issue, as defined by the Trust instruments, despite the subsequent unforeseeable actions of Christine.


Turning to the issue of whether Emily’s rights in the trusts vested prior to her re-adoption, the court concluded that “while the rights of Emily and the other beneficiaries may be inchoate, they are, nevertheless, vested by their inclusion in the trust document.  Thus, Emily’s interests under the decedent’s will and the 1995 Trust fully vested, subject only to the condition of her survival as provided for in the instruments (citation omitted).” 


The court further noted that SCPA 2205 permits a “a person interested” to compel an accounting. A “person interested” is defined by SCPA 103(39) as “[a]ny person entitled or allegedly entitled to share as beneficiary in the estate.” The court concluded that Emily was a “person interested” and entitled to an accounting. Therefore, absent a genuine issue of fact requiring a trial, the Surrogate’s Court properly granted summary judgment in the Petitioners’ favor.


One thing is clear from the Svenningsen decision. Regardless of how convoluted the facts of a given case, or how complex the law governing its resolution, when it comes to inheritance rights, the courts are guided predominantly by the decedent’s intentions.