A discovery proceeding pursuant to SCPA 2103 may be commenced by any legal representative of the estate, including a preliminary executor or a temporary administrator. An estate fiduciary has a duty to collect and preserve estate assets for the benefit of the beneficiaries of an estate. To this extent, when the fiduciary knows, or has reason to believe that assets of the estate have been misappropriated, or that someone has information about, or has a disputed claim to estate assets, a 2103 proceeding should be considered.
A SCPA 2103 proceeding has two phases. The first phase is the inquisitorial phase, which is the discovery portion of the proceeding. In essence the fiduciary is asking the Court for permission to examine, under oath, an individual, for the purposes of determining whether or not that individual has information relating to the existence or whereabouts of estate assets. If the court finds reasonable grounds for the examination, it will order that a respondent, or respondents, appear and subject themselves to examinations. In this regard SCPA 2103 is very broad in scope and has been likened to a licensed fishing expedition as a fiduciary need not have concrete evidence to commence the 2103 proceeding. Indeed, the proceeding may be instituted against any person having “possession or control” or “knowledge or information” about any property, or the proceeds or value thereof, which should be paid to the fiduciary. [SCPA 2103 (1)].
SCPA 2103 provides that a fiduciary may present to the court:
a petition showing on knowledge or information and belief that any property as defined in 103 or the proceeds or value thereof which should be paid or delivered to him is (a) in the possession or control of a person who withholds it from him, whether possession or control was obtained prior to creation of the estate or subsequent thereto, or (b) within the knowledge or information of a person who refuses to impart knowledge or information he may have concerning it or to disclose any other fact which will aid the petitioner in making discovery of the property, or (c) he has reason to believe, in the possession or control of a person described in subparagraph (a) of this subdivision or within the knowledge or information of a person described in subparagraph (b) of this subdivision and praying that an inquiry be had respecting it and that the respondent be ordered to attend and be examined accordingly and to deliver the property if in his control.
However, despite the broad latitude and liberal standards set forth by the statute, there are limits to a fiduciary’s inquiry. New York courts have made clear that they will not grant a fiduciary unfettered power in commencing a discovery proceeding. Significantly, there are a number of decisions holding that unless a petition for SCPA 2103 discovery seeks specific property or money that is in the possession or knowledge of a respondent, or with reasonable likelihood is in the possession or knowledge of the respondent, the proceeding must be dismissed.
However, this was not always the case. Indeed, in years past, courts had a much more expansive view of the threshold requirements for commencement of an SCPA 2103 proceeding. For example, in Matter of Mantia, 1997 WL 34851768 (Sur Ct, Nassau County), former Surrogate Radigan, described the scope of a SCPA 2103 examination as “quite broad”, explaining that because “the believed owner of the assets is deceased and cannot be called upon to provide aid in establishing his estate’s right to possession of these assets, the courts tend to give broader inquiry than what might be allowed in other kinds of proceedings brought in the Surrogate’s Court. Surrogate Radigan, quoting Matter of Rosencrantz, 5 Misc 2d 308 (Sur Ct, Kings County 1956), described the allowable area of inquiry as a “fishing expedition,” a term identifying a type of inquiry that is usually unnecessarily intrusive.”
Similarly, in Matter of Fialkoff, 45 Misc.3d 1205(A) (Sur Ct, Queens County 2014), Surrogate Kelly, in describing a 2103 discovery proceeding, held that “the inquisitorial stage anticipates that the pleadings will be non-specific and the petitioner is not required to set forth allegations sufficient to sustain a cause of action but only those that justify an inquiry. The petitioner should be allowed the broadest latitude in deposing a respondent to obtain information to aid the fiduciary in administering the estate and determining whether recovery of assets should be pursued.” Surrogate Kelly added that the petition may be stated upon information and belief and that the allegations only need show that any property or the proceeds or value thereof which should be paid or delivered to the fiduciary are in the possession or control of a person who is withholding it or within the knowledge or information of a person who refuses to tell the fiduciary where it is.
In Matter of Boccia, 2001 NY Misc LEXIS 1367 (Sur Ct, Nassau County), the court noted that the inquisitorial stage of a discovery proceeding is a licensed fishing expedition by the executor and that at that stage the fiduciary is not required to set forth allegations to sustain a cause of action, only those which justify an inquiry. This is because a fiduciary who may know little or nothing about the decedent’s affairs should have an opportunity to assist in the recovery of estate assets or to administer the estate. The courts tend to entertain this proceeding liberally when the information sought relates to estate assets or their value because it helps the fiduciary perform his/her duty to marshal assets.
The foregoing cases, along with many others like them, set a dangerous precedent of permitting fiduciaries to engage in licensed fishing expeditions based solely on pure conjecture that a decedent may have maintained an ownership interest in property that may be in possession of a respondent.
Within this context, the Appellate Division First Department, in Matter of Perelman, 123 AD3d 436 (1st Dep’t 2014) addressed the parameters of a SCPA 2103 discovery proceeding. In Perelman, the executor commenced a proceeding seeking information and the turnover of the decedent’s interest in various family businesses that were allegedly misappropriated prior to her death. The respondents moved to dismiss the petition arguing that the petitioner’s claims were barred by documentary evidence, and on the basis of the statute of limitations, res judicata, and collateral estoppel. Petitioner maintained that he had a fiduciary duty to pursue the claim and that SCPA 2103 has been broadly construed as to allow a “fishing expedition” in order to assist the fiduciary in recovering property or administering an estate. Respondents maintained that while discovery pursuant to SCPA 2103 is often labeled a fishing expedition, the authorities did not consider it to be a fishing expedition with an unlimited license.
In an opinion and Order, dated February 15, 2015, the Surrogate’s Court denied the motion to dismiss. On appeal, the Appellate Division First Department unanimously reversed the order of the Surrogate’s Court and granted respondents’ motion. Critically, the Court held that the petitioner “failed to demonstrate the existence of any specific personal property or money which belongs to the estate, or even a reasonable likelihood that such specific property or money might exist.” In doing so, the Court dismissed the notion that a fiduciary seeking discovery has the authority to engage in an unfettered fishing expedition.
Despite the fact that SCPA 2103 discovery proceedings are often referred to as licensed fishing expeditions, it is clear from the First Department’s decision in Matter of Perelman, that unless a SCPA 2103 petition lists specific property that is in the possession or knowledge of a respondent, or the petitioner reasonably believes is in the possession or control or within the knowledge or information of a respondent, the proceeding may be subject to dismissal.
This article appears in a forthcoming issue of the Trust and Estates Law Section Journal, a publication of the New York State Bar Association. To learn more about the Trusts and Estates Law Section, please visit NYSBA.ORG/TRUSTS.