Who are the Distributees?
Attempting to determine the rightful intestate distributees of decedents in kinship hearings can be interesting. To illustrate, in the most general way, how the process works in Surrogate’s Court, let us take the simple case of Joe, an MTA switchman who never executed a Will, never married, and died at the age of 90, having lived in a modest apartment in Flushing, New York for the last 70 years (except for the years 1944 through 1949 when he served in the armed forces). There is no sign that Joe has any family. What happens to Joe’s $75,000 condominium and $2 million in cash and marketable securities?
Joe’s assets will be administered by the Public Administrator - the Public Administrator will marshal Joe’s assets, pay all debts and administration expenses, and after due diligence, will render an accounting to whatever potential heirs the Public Administrator is able to locate through due diligence and the Attorney General of the State of New York. To get a bit of an idea as to what the Public Administrator does, check out these websites, http://queenscountypa.com/ http://www.nyc.gov/html/kcpa/html/home/home.shtml. (You can also follow the Queens County Public Administrator on twitter if you are interested).
In Joe’s case, the Public Administrator is able to determine through due diligence, e.g., talking to Joe’s neighbors, reviewing Joe’s birth certificate found among Joe’s personal effects, looking at census records, looking at Joe’s draft registration card, and looking at social security records, the identity of Joe’s long deceased mother, and two gentlemen who may be cousins of Joe on his mother’s side (maternal cousins). The Public Administrator is unable to obtain any information about Joe’s father. The Public Administrator has not found any records showing that Joe was married or had any children.
Because Joe’s intestate distributees are unknown, the Public Administrator will request that the Surrogate permit the Public Administrator to pay the assets of Joe’s estate to the Commissioner of Finance for the City of New York (Comptroller of the State of New York for Counties outside of New York City) in the absence of a determination of Joe’s intestate distributees. The Public Administrator would cite to the unknown heirs of Joe’s estate by publication, the two potential maternal cousins, and the Attorney General. If no-one appeared in the accounting proceeding, the assets would be deposited with the Commissioner of Finance and would be subject to being recovered by Joe’s heirs that come forward and prove heirship. If potential heirs appear in the accounting proceeding, there will be a kinship hearing in the context of the accounting proceeding. The kinship hearing in that SCPA § 2222 withdrawal proceeding would proceed in the same manner as a kinship hearing in the accounting proceeding. Those persons claiming to be heirs of Joe and seeking to receive Joe’s assets would be required to prove that they and Joe share a common ancestor and that there are no missing or unknown intestate distributees with an equal or superior right to inherit.
Kinship hearings often involve alleged heirs presenting documentary evidence, such as birth certificates, death certificates, social security applications, mortuary records, probate files, obituaries, baptismal certificates, marriage certificates, decrees of divorce, census records and any other publicly available documents that are useful in demonstrating kinship. The presentation of this documentary evidence will also be accompanied by the testimony of witnesses. In Joe’s case, his birth certificate and his signed social security application indicate that his father is unknown. In Joe’s case, we might also hear from the fellow who lived in the apartment next to Joe, who would testify that he never saw anyone visit Joe, and that he spoke with Joe quite often and that Joe stated that he regretted that he was never married and never had children. The absence of any record of Joe being married or having children (after a thorough search of public records) together with Joe’s neighbor’s testimony, would be highly probative to the issue of whether Joe died with a spouse and issue, as these would be the first people to take in intestacy. This testimony would be admissible over a hearsay objection based on the pedigree exception to hearsay. There are certain presumptions that a person claiming to be an heir can avail themselves of, such as the presumption that a person is deemed to have predeceased the decedent if he would have been 100 years old at the time of decedent’s death. Another oft employed presumption arises by statute, namely, the three-year presumption under SCPA § 2225. In some cases a professional genealogist will assist counsel in attempting to prove heirship, and even scientific evidence, such as DNA evidence, might come into play in a kinship hearing.
Kinship proceedings, aside from telling sometimes compelling narratives of peoples’ lives, can be illuminating from a historical perspective. Census records reveal extended families struggling to make it in their new country in ethnic enclaves, and the chaos of World War II and the devastation of the Holocaust can present special challenges to those attempting to prove kinship to a decedent. With vast public records destroyed and the world having been robbed of the memories of millions of people, evidentiary hurdles may abound. In similar fashion, the legacy of slavery and racial discrimination present challenges when attempting to prove kinship to an African-American decedent.
Undue Influence or Duress?
In a recent decision in the Estate of Mildred Rosasco , Surrogate Glen carefully explains the difference between undue influence and duress, two legal concepts that have become conflated in Surrogate's Court practice.
If you speak with a trusts and estate's lawyer and ask her to define undue influence, you will hear something like “undue influence is moral coercion that destroys a testator’s will to act independently and leads the testator to act contrary to his own desires because he cannot refuse or is too weak to resist.” However confident that lawyer sounded in her recitation of this definition, understand that the Court of Appeals has stated, as Surrogate Glen tells us, that "[i]t is impossible to define or describe with precision and exactness what is undue influence . . ." In Rosasco, Surrogate Glen explains how courts have struggled with the concept of undue influence, citing to decisions dating back to the 19th Century, and how the Court of Appeals, in Matter of Walther (6 NY2d 49 [1959]), affirmed the explanation of undue influence cited above.
What is critical in a probate contest involving an objection on the grounds of undue influence is that a prima facie case of undue influence requires a showing, not only of opportunity and motive to exercise undue influence, but also, of the actual exercise of undue influence. Although undue influence can be proven by circumstantial evidence, as there is rarely direct proof of undue influence, it can only be proven by substantial circumstantial evidence. Undue influence is difficult to prove, but the burden of proving undue influence is eased where there is a showing that the testator was in a relationship of trust and dependence with proponent of the will, i.e., the existence of a confidential relationship. Surrogate Riordan’s decision in Matter of Zirinsky is a must read for anyone trying to get a handle on undue influence (Also review the Appellate Court decision on the appeal of the Zirinsky case).
As to duress, Surrogate Glen, citing the Restatement (Third) of Property, notes that duress is something different from undue influence. She explains that a will or a bequest is procured by duress if the wrongdoer threatened to perform or did perform a wrongful act that coerced the testator into doing something that she would not otherwise have done. A “wrongful act” in this definition means a criminal act or an act that the wrongdoer had no right to do.
One can understand how the two concepts differ by examining a three-year-old child’s threats. When a three-year-old has his mind set on eating a second piece of chocolate or on watching a cartoon that features incredible acts of violence, he might threaten to flush his father "down the toilet." In the alternative, he might repeatedly and sincerely state that he will not talk to his father until he receives his chocolate or is gratified by watching Spiderman deliver bone-crushing blows. Flushing another human being down the toilet would certainly constitute a crime. The three-year-old child’s father taking this threat seriously and acting on this threat could be said to be acting under duress. On the other hand, absent some legal relationship, such as that which a guardian has with his ward, a person is well within his rights to refuse and refrain from talking or associating with another. If the three-year-old child’s father is acting on the child’s threat to cut off all communication, he might be said to be acting as a result of undue influence.
Who May Serve as Fiduciary?
The newly elected Surrogate for Nassau County, Edward W. McCarty III, recently issued a decision in what appears to be a gut-wrenching case involving an infant decedent. In the Estate of Jessica Fernandes, Surrogate McCarty attempts to get to the bottom of two commonly encountered issues in an infant decedent’s estate, that is 1) who should serve as administrator of the decedent’s estate; and 2) whether one of the decedent’s parents should be barred from receiving estate assets.
In most estates, the answer to the question of who will serve as fiduciary is straightforward. Where a decedent dies having executed a last will and testament, the will identifies the nominated executor (or co-executors). The nominated executor will serve unless the Court finds that he or she is ineligible to serve for the reasons set forth in SCPA § 707. Every person interested in the estate has the opportunity, pursuant to SCPA § 709, to object to the appointment of the nominated executor. Where a person dies intestate, a person interested in the estate may object to the appointment of an administrator on one or more of the grounds set forth in SCPA § 707. Article 10 of the SCPA governs the order of priority of who is entitled to serve as an administrator of an intestate estate.
In Fernandes, the decedent was a 12 year-old girl who succumbed to respiratory failure. She had been incapacitated since birth, and her mother had been appointed her personal needs guardian, as well as co-guardian of her property along with an attorney, pursuant to Article 81 of the New York Mental Hygiene Law. The decedent had recovered in excess of $3.5 million in the settlement of a medical malpractice action. All else being equal, the decedent’s mother and father have equal priority to serve as administrator of her estate pursuant to SCPA § 1001, and the Court may appoint, in its discretion, one or both of them.
Following the decedent’s death, her mother petitioned for letters of administration and requested that the decedent’s father be disqualified, pursuant to EPTL § 4-1.4, from taking an intestate share of decedent’s estate on the basis of his alleged failure to provide for, and abandonment of, the decedent. The decedent’s father struck back, denying that he had abandoned the decedent, objecting to the decedent’s mother’s appointment as administrator of the decedent’s estate pursuant to SCPA § 707 on the grounds that the decedent’s mother had engaged in fraud and dishonesty, and cross-petitioning for letters of administration. The decedent’s mother appears to have also alleged that the decedent’s father is a non-domiciliary alien and thus ineligible to serve as administrator pursuant to SCPA § 707 (1) (c), and that he cannot read or write in English, and that the Court should thus, in its discretion, find him ineligible to serve pursuant to SCPA § 707 (2). The decedent’s mother also alleged that decedent’s father’s open hostility to her rendered him ineligible to serve.
Judge McCarty’s decision indicates that he is poised to address the factual allegations that the parties have made. He explained that summary judgment was inappropriate; the papers before him left several issues of fact to be resolved at a hearing (the hearing may have already been held). Aside from untangling the issue of the decedent’s father’s immigration status, it seems that the Surrogate will be faced with determining whether each of the decedent’s parents can read and write in the English language, and, if not, whether this should affect their ability to serve. In this inquiry, he may be informed by a recent decision from the Surrogate’s Court, New York County, Matter of Torbibio.
Moreover, while dishonesty is one of the grounds set forth in SCPA § 707 (e) as a basis to render someone ineligible to receive letters, dishonesty as contemplated by the statute is not dishonesty in answering questions such as “how big was that fish that you caught last fall?” but, as the First Department recently explained, dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the contemplated fiduciary. As for the decedent’s mother’s claim that the decedent’s father’s hostility renders him ineligible, as countless Surrogate’s Court practitioners have explained to their clients, mere hostility is simply not enough. It is well-settled that an individual will only be barred from being appointed fiduciary where friction or hostility interferes with the proper administration of the estate, and future cooperation is unlikely.
Barring a settlement, it appears that the Court will reach the second issue, whether the decedent’s father should be disqualified from sharing in the decedent’s estate, at the close of discovery. His decision contains a granular analysis of disputes among the parties as to documentary discovery - the kind of analysis that is helpful to lawyers when they get down to the task of drafting demands for documents.
Construction, Exoneration, Delegation, and Fiduciary Duty
One of the first reported Surrogate’s Court decisions of 2011 comes from Monroe County. The decision is interesting in that the court addresses various legal issues in the context of what it describes as “a power-sharing arrangement that is rather unconventional, even by today's standards of Trust and Estate practice.” The decision addresses an exoneration clause, the delegation of investment responsibility, the overriding duty of loyalty of fiduciaries, the Prudent Investor Act, the construction of wills and trust instruments, and the status of an “advisor” as a de facto trustee.
The inter vivos trust at issue was created in 1945, in conjunction with the grantor’s outright gift to the University of Rochester to create a clinic under the auspices of the University’s Department of Psychiatry. The grantor directed that Trust income be used to operate and maintain the clinic. The grantor named an institutional trustee (“Trustee”) and also created an “Investment Advisory Committee” comprised of three individuals, two to be named by the University of Rochester and one by the Trustee.
By the provisions of the Trust instrument, the Advisory Committee has considerable power and control over the investment of Trust assets. The Advisory Committee was granted “sole and exclusive power and control over the investments making up this trust fund, the sale of securities, and the reinvestment of any funds at any time in the trust estate” and given the power to direct the Trustee in writing in connection with such power and control. The Trust instrument also contains an exoneration clause, and provides that “[t]he Trustee shall be charged with no responsibility or duties with respect to the investment or reinvestment of trust funds, other than to carry out the written directions or communications received by it from the Committee.”
Approximately 65 years after the Trust was created, a disagreement arose between the Advisory Committee and the Trustee that required judicial attention. Specifically, the Advisory Committee directed the Trustee to invest all of the Trust assets in the University's long-term investment pool, and the Trustee sought advice from the Court.
The Court made clear that its task was to determine whether the proposed investment in the long term investment pool would frustrate the intent of the grantor. It first addressed the intent of the grantor and the purpose of the Trust. Reading the Trust instrument as a whole, the Court found that that the Advisory Committee and Trustee were required to work in concert to promote the goals of the grantor to fund the operation of the Psychiatry Department. Although the terms of the Trust instrument quoted above confer broad authority upon the Advisory Committee, the Court held that such authority could not be used in contravention of the stated purpose of the Trust, and that the Trustee and the Advisory Committee, as a de facto co-trustee, share the fiduciary obligation to invest and manage the assets in a manner consistent with the purpose of the Trust.
In reaching this conclusion, the Court noted the limits of the Trust instrument’s allocation of investment responsibilities to the Advisory Committee and the concomitant exoneration clause. The Court found that the exoneration clause employed in the Trust instrument, an attempt to render the Trustee completely unaccountable in deference to the Advisory Committee, is inconsistent with the nature of a trust, and void as against public policy. If the Advisory Committee’s control over investment decisions was completely dispositive, there would be little sense in having a trustee. According to the Court, while the Trustee is under a duty to comply with the directions of the Advisory Committee with respect to investment decisions, the Trustee cannot ignore its fiduciary responsibility; the Trustee could be held liable for abiding by the direction of the Advisory Committee where there may be reason to believe that the Advisory Committee is not fulfilling its fiduciary duty.
The Court had several problems with the proposed investment in the long term investment pool. The investment would remove both the Trustee and the Advisory Committee from any role in administering the Trust assets. Trust funds would be transferred to the University's custodian bank, and such bank would have no fiduciary obligation to the Trust. The funds would be managed by numerous investment management firms under the oversight of a subcommittee of the University's Board of Trustees. Once the Trust’s funds were invested in the long term investment pool, neither the Advisory Committee, nor the Trustee, would have input concerning asset allocation, or the discretion to select, retain or sell off any individual assets. Such decisions would be overseen by the subcommittee of the University’s Board of Trustees.
Quoting Meinhard v. Salmon, the Court first noted that two of the three members of the Advisory Committee were employed by the University, and that the proposed investment would place the majority of the Advisory Committee, owing a duty of loyalty to both the University and the Trust, in a position of conflict if questions were to arise as to the handling of Trust funds in the long term investment pool. The Court was “hard-pressed” to allow the majority of the Advisory Committee to be allowed to direct the investment of Trust assets in the long term investment pool under these circumstances. The Court acknowledged that the third member of the Advisory Committee was also in a potential position of conflict as an employee of the Trustee, but found that this third member’s conflict was less of a concern considering the minority status.
The Court also held that while delegation of investment and management functions is permissible under the EPTL, the proposed investment constituted a delegation far afield from what is permitted by statute (EPTL § 11-2.3(c)), and would be inconsistent with the Trust instrument.
This case is certainly worth a read.
New Law - Powers of Attorney in New York
Take a look at the new law applicable to powers of attorney in New York. You will have to go to the New York State Legislature search page , type in the bill number (A06421B), select 2008 from the pop-up menu, and check off the box for "Text." The effective date is currently March 1, 2009 - so you have a month to get up to speed!
Westchester Surrogate's Court Examines Equitable Claims
A recent decision from the Westchester County Surrogate’s Court, Edelman v Hatami is an entertaining read. The decision addresses the Statute of Frauds, and provides a good example of how litigants will attempt to employ the equitable doctrines of promissory estoppel and constructive trust in estate litigation.
In Edelman the defendant sought recovery against a decedent’s estate, claiming breach of contract, promissory estoppel, and constructive trust. According to the decision, the defendant met the decedent sometime in 1995 or 1996, when the defendant became a tenant in a building owned by the decedent. At that time, the defendant was in her early 30s, and the decedent was in his late 60s. They developed what the Court described as an “intimate” relationship that lasted until the decedent died in September 2004 at the age of 77. According to the defendant, in exchange for certain services rendered on her part, the decedent orally agreed to pay her living expenses for a three-year period, to pay her law school tuition, and to transfer to her the apartment in which she resided. The services allegedly provided to the decedent included ensuring that decedent was cared for and fed healthy, nutritious meals; monitoring the decedent's medical and physical condition; acting as the decedent's personal confidant concerning all aspects of the decedent’s life; and, acting as decedent's business confidant. The Court dismissed all of the defendant’s claims.
The Court’s dismissal of the defendant’s breach of contract, promissory estoppel and quasi-contract claims was based, in part, on its determination that the services provided by the defendant were consistent with the “intimate” relationship that the decedent and the defendant shared. The Court also noted that the defendant received substantial benefits from the decedent in the course of their relationship, such as an allowance of approximately $5,000 per month, nearly $200,000.00 in credit card charges over a period of several years, and a year-long all-expense-paid trip to England. The Court’s dismissal of the defendant’s constructive trust claim was based on the defendant’s failure to demonstrate a necessary element of a constructive trust; a transfer on the defendant’s part in reliance on a promise of the decedent. If you enjoy reading the decision, stay tuned, as it appears that the defendant may be taking an appeal.
What is a Trial or Hearing on the Merits?
Be careful before you start answering this question. When it comes to applying CPLR §4519, commonly referred to as the Dead Man’s Statute, easy answers are sometimes hard to find.
CPLR §4519 precludes testimony upon an objection at “the trial of an action or the hearing upon the merits of a special proceeding,” where 1) the witness has a financial interest in the outcome of the litigation; 2) she is to be examined about a personal transaction or communication of the decedent; 3) she is to be examined as a witness on her own behalf; and, 4) the testimony sought to be elicited is against the fiduciary or survivor of the decedent or a person deriving his title from the decedent. The principle purpose of the statute is to prevent fraudulent claims which could easily be asserted against a decedent’s estate – since the decedent cannot give his version of the transaction or conversation, the financially interested witness is not permitted to give her version. There is no shortage of commentary concerning the Dead Man’s Statute and a great number of cases examine its application (see Matter of Wood 52 NY2d 139 [1981]; Sepulveda v Aviles, 308 AD2d 1 [1st Dept 2003];Matter of Radus, 140 AD2d 348 [2d Dept 1988]; Matter of Miller 97 AD2d 581 [3d Dept 1983]; Estate of Breitman, 4/7/99 NYLJ 35, [col. 5] [Sur Ct, Nassau County 1999]; Matter of Dunbar, 139 Misc 2d 955 [Sur Ct, Bronx County 1988]; See also Radigan, The Dead Man’s Statute – Alive and Well in the Surrogate’s Court, 50 NY St BJ 470 [1980]; Brooks, It’s Time to Kill the Dead Man’s Statute, NYLJ, July 18, 1988, at 1, col 1).
By its plain language, CPLR §4519 has no application at any stage of a proceeding or action other than at “a trial or a hearing on the merits.” It is clear that the statute has no application during pre-trial discovery at a deposition pursuant to Article 31 of the CPLR. Similarly, it has no application in examinations held pursuant to SCPA §§1404, 2211, or at an examination during the inquisitorial stage of a discovery proceeding (see Philips v Kantor & Co., 31 NY2d 307 [1972]; Lemlich v Lemlich, 266 AD 748 [2d Dept 1943]; Wall Street Assoc. v Brodsky, 295 AD2d 262 [1st Dept 2002]).
What about a hearing on a preliminary injunction? Is that considered a “trial or hearing on the merits” within the meaning of CPLR §4519.
Recently, in Matter of Tschernia (18 Misc 3d 1114[A] [Sur Ct, Nassau County 2007]), Surrogate Riordan addressed whether the statute should apply to bar testimony at a hearing on a preliminary injunction. There, the petitioner sought a preliminary injunction restraining the preliminary executrix from selling a substantial parcel of real property. His petition sought a declaration that he was the owner of the subject real property, or in the alternative, to impose a constructive trust on the real property. In an effort to meet his burden on the preliminary injunction, the petitioner sought to testify as to his transactions with the Decedent. Surrogate Riordan held that the Dead Man’s Statute applied to bar the petitioner’s testimony, focusing on the fact that a hearing on a preliminary injunction is not merely a discovery, disclosure, or fact gathering proceeding, but is aimed at determining whether a provisional remedy will be afforded based, in part, on weighing the likelihood of success on the merits. He observed as follows:
Unlike in the inquisitorial stage of a proceeding, the protection of the Dead Man's Statute may be raised when the testimony is offered in evidence at the trial on the merits as to the issue of title, or is used as a basis for the determination of title. Unlike a pretrial deposition or the inquisitorial stage of an SCPA 2103 proceeding, the preliminary injunction hearing is not inquisitorial in nature. Presumably, the testimony [the petitioner's] attorney attempted to elicit from [the petitioner] was to help demonstrate that he is likely to succeed at trial. It would be incongruous for the court to allow [the petitioner] to testify at the preliminary injunction hearing on matters about which he would be disqualified, upon a proper objection, from testifying at trial.
Surprisingly, it appears as though Tschernia may be the only reported case that squarely addresses the application of the Dead Man’s Statute at a hearing on a preliminary injunction. While the plain language of the statute can potentially be construed to preclude its application at a hearing on a preliminary injunction, the result in Tschernia follows the logic of relevant case-law and the policy underlying the Dead Man’s Statute.
