While the removal of a fiduciary has long been the subject of Surrogate’s Court opinions, it is not often that the Appellate Division weighs in on the issue. However, in Matter of Epstein, 2022 NY Slip Op 00658 (2d Dep’t 2022), the Second Department did just that. The opinion is an important guidepost for the kind of conduct that warrants a fiduciary’s removal.

In Matter of Epstein, the Appellate Division, Second Department, reversed a decree of the Surrogate’s Court, Suffolk County which, after a nonjury trial, inter alia, denied the petitioner’s request to revoke the letters testamentary issued to her co-fiduciary, and modified the decree of the same court, which denied the petitioner’s request to revoke the letters of trusteeship issued to her co-trustee, and substituted therefor a provision that the application be granted.

The decedent died, testate, on August 17, 2008, survived by two daughters (the petitioner and the respondent, respectively), and three grandchildren. Pursuant to the pertinent provisions of his will, the decedent created generation skipping trusts (GST) for the benefit of his grandchildren and devised and bequeathed the residue of his estate in equal shares to his daughters. Upon admission of the decedent’s will to probate, letters testamentary and of trusteeship issued to the petitioner and the respondent, as the nominated executors and trustees thereunder.

Among the decedent’s assets at death were two LLC’s. Within a year after his death, a 10% interest in the entities was distributed to the petitioner and respondent, as beneficiaries, and $150,000 was deposited into each of the GST trusts in partial satisfaction of the bequests to the grandchildren. Thereafter, disagreements arose between the co-fiduciaries regarding distribution of the estate, which resulted in a July, 2011 agreement signed by all the beneficiaries, and the co-fiduciaries in their roles as trustees.

Nevertheless, the disputes between the co-fiduciaries continued. A little over a year after the agreement was signed, one of the LLCs sold its primary asset, and the petitioner, over objection by the respondent, instructed the managing member to allocate and distribute the estate’s shares in the company in accordance with the agreement. Further, the respondent refused to make distributions from the GST trusts to the grandchildren, and to create additional GST trust accounts for the grandchildren in order to comport with the FDIC limit. Additionally, the co-fiduciaries disagreed with respect to the filing of the estate tax return and payment of estate taxes, causing the petitioner to seek an order of the court to permit the payment of taxes.

Thereafter, proceedings were instituted by the petitioner to revoke the letters testamentary and of trusteeship issued to the respondent, amongst other things, and the respondent filed proceedings seeking petitioner’s removal, as well as an order compelling the grandchildren to return estate assets representing alleged overfunding of the respective GST trusts and excess cash distributions. The Surrogate’s Court denied both petitions, and the petitioner appealed.

The Court opined that the removal of a fiduciary pursuant to SCPA 711 and 719 must be exercised sparingly, and only where the record demonstrates a danger to the estate or trust administration. To this extent, removal will be ordered when conflict and hostility between co-fiduciaries impedes their stewardship.

The Court noted that the respondent repeatedly refused to countersign the estate tax return and checks in order to avoid penalties and interest being incurred by the decedent’s estate, claiming that the taxes were improperly calculated. To this end, she threatened to sue the estate’s bank for honoring checks for tax payments written by the petitioner, prompting the bank to freeze the estate accounts, and causing the petitioner to seek a court order to have the funds released in an amount sufficient to cover the estate’s tax liabilities.

The Court found that irrespective of her claims that the GST trusts were overfunded, the respondent’s conduct endangered the assets of the estate, and directed her removal as executor.

Further, with respect to her role as co-trustee, the Court found that the respondent placed her own interest above her fiduciary duty to act in the best interests of the GST trusts and their beneficiaries. Indeed, even accepting the respondent’s protestation that her only goal was to fund the trusts properly, the Court concluded that she was required to pursue this goal consistent with her stewardship by distributing funds to the grandchildren, and acceding to the creation of accounts to insure balances were less than the FDIC limits. In view thereof, the Court concluded that the respondent’s conduct thwarted the administration of the trusts, and held that the Surrogate’s Court improvidently exercised its discretion in denying petitioner’s application for her removal.

Some of the most interesting estate litigation issues arise in proceedings to determine a surviving spouse’s entitlement to an elective share, particularly when there are claims of abandonment.  Under EPTL § 5-1.1-A(a), “a personal right of election is given to the surviving spouse to take a share of [a] decedent’s estate.”  Section 5-1.2(a) provides that a husband or wife is a “surviving spouse,” within the ambit of EPTL § 5-1.1-A, “unless it is established satisfactorily to the court having jurisdiction of the action or proceeding that . . . [the] spouse abandoned the deceased spouse, and such abandonment continued until the time of death” (EPTL § 5-1.2[a][5]).

To establish abandonment, the departure of a spouse from the marital home must be unjustified and without the consent of the now deceased spouse (Matter of Maiden, 284 NY 429, 432 [1940]). The question of abandonment is one of fact, and often a close one (In re Estate of Riefberg, 58 NY2d 134, 136 [1983]).

Establishing facts in an abandonment proceeding is often difficult due to CPLR 4519, also known as the Dead Man’s Statute. To greatly oversimplify CPLR 4519, an interested party is barred from testifying regarding transactions and communications with a deceased person.  Therefore, disinterested witnesses are often critical in determining whether the surviving spouse abandoned the deceased spouse.

Most marriages are very private, so it can be difficult to find disinterested witnesses who can competently testify regarding the marriage. While there may be a friend or neighbor that can testify that the remaining spouse consented to the departure of their spouse from the marital home, this very personal information is often not widely shared, or perhaps even accurate.  One can certainly imagine a scenario where a husband does not consent to his wife’s departure from the marital home. However, to save face the husband tells a friend that he consented to his wife’s departure, or even told his wife to leave, causing huge issues for our hypothetical husband in an abandonment proceeding.

Ruff v Ruff, 91 AD2d 814 [3d Dept 1982] notes the difficulty presented by the Dead Man’s Statute: “[t]he issues raised in such a determination are difficult enough to resolve between living spouses, but almost impossible to objectively establish where, as here, the testate partner is dead and the survivor is in most respects incompetent to testify to ‘transactions’ involving the decedent”.  In Ruff, the departing spouse was found to have had the consent of the remaining spouse due to the testimony of various witnesses demonstrating that the marriage was disharmonious and that while the departing spouse frequently left home without explanation prior to the couple’s permanent separation in 1963, those departures from the marital home were never over decedent’s objection.

Another interesting issue arising in abandonment proceedings is the admissibility of pleadings and testimony from a divorce proceeding when the decedent dies during the pendency of the divorce proceeding.

Generally, under Domestic Relations Law 235 public inspection of pleadings and testimony in a divorce proceeding is prohibited, unless authorized by Court Order. “However, those protections do not extend where the party requesting disclosure of the divorce proceeding can ‘articulate and particularize the relevance of information sought to an important pending matter’” (Estate of Sharon Centner, 2019 NYLJ LEXIS 982, *5 [Sur Ct, Richmond County 2019] [citations omitted]). The Centner Court cited Janecka v Casey, 121 AD2d 28 [1st Dept 1986] where matrimonial records were unsealed because the decedent committed suicide and her plaintiff husband commenced litigation against his wife’s former physician and hospital.

In Centner the surviving husband moved for, among other things, a protective order barring his daughter from using documents from a divorce proceeding between the surviving husband and his late wife.  Surrogate Titone held that the shield of Domestic Relations Law 235 should yield because “it would seem contradictory and unjust not to allow discovery and possible admissibility of the divorce proceeding as evidence for or against [the claims of abandonment] [Id.]).

The Surrogate Titone further noted that:

It would be supremely ironic to allow a spouse, who, by seeking a divorce under the no fault statute, has implicitly represented under oath that neither party was at fault for the irretrievable breakdown of the marriage, to later claim that his/her departure from the marital residence was justified by the misconduct or fault of the other spouse because a change of circumstances (i.e., the death of the other spouse) renders it financially beneficial for him/her to do so (Id.).

These are just some of the many interesting issues that arise in abandonment proceedings. My colleagues Eric W. Penzer and Spencer L. Reames also discuss abandonment in prior posts.

Courts greatly appreciate when parties settle their disputes by agreement.  Settlements alleviate the courts of the burden of overwhelming caseloads, and further the public policy of encouraging parties to order their affairs by contract rather than relying on statute and common law.  As the Surrogate’s Court recently reiterated in Matter of Eckert, “stipulations of settlement are judicially favored, will not lightly be set aside, and are to be enforced with rigor and without a searching examination into their substance as long as they are clear, final and the product of mutual accord.”

Settling an estate litigation is especially difficult.  With estate litigation, parties often find it difficult to reconcile their personal view of what is right and just with the constraints of the law and our imperfect justice system.  As this experiment tends to show, it can be hard to take.  Nevertheless, settlements often save litigants from the risk and cost of continuing litigation.

What makes a binding settlement?  As explained and examined in detail by my colleague, a settlement requires that the parties make an expression of mutual assent on all material terms, and it cannot be conditioned on further events.  A classic example of an agreement conditioned on further events is the unenforceable “agreement to agree.”  Further, under New York’s Civil Practice Laws and Rules (applicable in the Surrogate’s Court), a settlement “must be in writing and subscribed by the party or the party’s attorney against whom enforcement is sought.”  Parties and counsel should understand that the courts so favor settlement that they will find an enforceable settlement agreement among written exchanges that may not have been intended to serve as a settlement agreement.  Matter of Eckert illustrates this point.

Eckert involved a fight between the decedent’s surviving spouse and his daughter.  Decedent died without a will, and his daughter and surviving spouse filed competing petitions for letters of administration.  Decedent’s daughter challenged the validity of the decedent and his surviving spouse’s marriage.  Decedent’s surviving spouse alleged that his daughter converted proceeds of certain retirement accounts.  With several proceedings and the promise of bitter litigation, the Surrogate referred the parties for alternative dispute resolution, and the parties mediated their dispute shortly thereafter. The mediation produced a verbal agreement, and the surviving spouse’s counsel e-mailed the daughter’s counsel the next day as follows:

Pursuant to the settlement reached, we will incorporate the following terms:

1) $515,000.00 payment within 20 days of fully signed agreement/stipulations of discontinuance being provided. Payment to be made by certified check made payable to [daughter] and delivered to [counsel];

2) Stipulation of discontinuance with prejudice as to petitions in Surrogate’s Court;

3) Stipulation of discontinuance with prejudice as to Sup. Ct. action;

4) Non-disparagement provision;

5) Confidentiality provision;

6) Mutual general releases;

7) Affirmation that [daughter] and [surviving spouse] have or will destroy any medical records in their possession.

If there is anything I missed, please let me know. Also, as we discussed yesterday, to the extent we need to be flexible on payment dates to minimize tax implications, we are willing to work in good faith to ensure that tax treatment is minimized by timing.

(emphasis added).

The daughter’s counsel replied as follows:

Leave the timing of payment open until we have more information. There should also be an indemnification for [the daughter] and, in addition to destroying records in her possession, a representation that [the surviving spouse] has not provided copies of medical records to any other person. We will provide any other comments we may have when we review the draft agreement.

(emphasis added)

The daughter’s counsel sent a draft written settlement agreement for the surviving spouse’s counsel’s review a few days later.  After about a month, the surviving spouse’s counsel replied they had researched the tax implications of the settlement.  Counsel advised that they had concluded that the settlement would impose “enormous” tax liability on the surviving spouse regardless of the timing of settlement payments, and that as a result the settlement could not be consummated.

The Surrogate’s Court however, enforced the e-mails as a binding settlement.  It rejected the surviving spouse’s contention that the settlement was conditioned on confirming its tax implications.  According to the court, “if the [surviving spouse] wished to make the settlement contingent upon a review of her tax consequences, it was incumbent on her and/or her counsel to make the term material by explicitly communicating to [the daughter] and/or her counsel that such review was a prerequisite to her full assent to this agreement. These are not casual email communications. A party is entitled to rely upon the communications made by opposing counsel on behalf of the other party with respect to settlement, whatever the mode of communication.”

The lesson here might be for lawyers.  The courts might scrutinize and construe an e-mail intended to confirm a conditional commitment as an enforceable agreement. Even in e-mails meant to further open and fruitful settlement discussions, precision is key.   Further, a statement reserving all rights when communicating and negotiating with counterparts might be warranted, even if such a statement makes all of the “noises” that one might expect from a lawyer.

In January 2021, I wrote about Broome County Surrogate David H. Guy’s decision in Matter of Ryan, in which Surrogate Guy addressed the admission of a remotely witnessed will to probate in New York State.  Recently, in Matter of Holmgren, Queens County Surrogate Peter J. Kelly wrote a decision addressing the information that a self-proving affidavit must contain in order to prove the validity of a remotely executed will.  I now write about Surrogate Kelly’s decision in Holmgren, as a follow up to my prior post concerning Ryan.

From April 7, 2020 to June 25, 2021, New York Executive Order 202.14 (the “Executive Order”) authorized “the remote execution of wills” in this State (see Matter of Holmgren, File No. 2021-4954, 2022 NY Slip Op 22049 [Sur Ct, Queens County Feb. 23, 2022]).  The Executive Order – which the then-Governor implemented in response to the COVID-19 pandemic – permitted “the use of audio-visual technology to satisfy the ‘presence’ requirements contained in” Estates, Powers and Trusts Law § 3-2.1 (which governs the due execution of wills) (see id.).

Under the Executive Order, “the ‘presence’ requirements incident to the act of witnessing [a will] can be ‘virtually’ satisfied provided [that] the following conditions are met”: (a) “the testator has to be either personally known to the attesting witnesses or must present valid photo identification to the witnesses during the video conference”; (b) “the video conference must allow for direct interaction between the testator, witnesses, and if applicable, the supervising attorney (no-prerecorded videos)”; and (c) “the witnesses must receive a legible copy of the signature page(s) the same day the papers are signed” (see id.).  The Executive Order also “includes provisions whereby the attesting witnesses may sign the transmitted copy of the signature page(s) and transmit them back to the testator and further provides that the witnesses may repeat the witnessing of the original signature page(s) as of the date of execution provided [that] they are presented with the original signature pages and the electronically witnessed copies within 30 days of the remote execution ceremony” (see id.).

To ensure that the validity of a will, whether executed in-person or by virtual means, can be proved, “best practice” dictates that the attesting witnesses sign a self-proving affidavit (see id.).  In the self-proving affidavit, the attesting witnesses “swear to ‘such facts as would . . . establish the genuineness of the will, [and] the validity of its execution,” among other things (see id.).

In Holmgren, the petitioner offered a remotely executed will for probate, submitting (a) a waiver and consent signed by the testator’s sole distributee, and (b) a self-proving affidavit signed by the attesting witnesses to the propounded instrument’s execution (see id.).  Surrogate Kelly declined to admit the propounded instrument to probate based upon the self-proving affidavit that the petitioner submitted (see id.).  The Surrogate explained that the affidavit failed to establish compliance with the Executive Order’s requirements that: (a) the testator was personally known to the attesting witnesses, or had presented valid photo identification to them, during the execution ceremony; (b) the audio-visual technology used during the execution ceremony “was in working order and allowed for direct interaction between the testator and the witnesses in real time”; and (c) “a legible copy of the signature page was transmitted to the witnesses on the same day that the witnesses observed the signing” of the propounded instrument (see id.).

Surrogate Kelly also noted that the petitioner had submitted to the court “an original instrument bearing the original signatures of the testator and both attesting witnesses,” meaning that “the witnesses were, at some point, apparently presented with the original instrument” (see id.).  This was noteworthy because, while the Executive Order does not require the attesting witnesses of a remotely executed will to sign both the transmitted copies of the signature pages and the original signature pages, it does mandate that, when the attesting witnesses do so, they must be “presented with the original signature pages and the electronically witnessed copies within 30 days of the remote execution ceremony” (see id.).  As a result, the Surrogate concluded that the self-proving affidavit on file with the Court had to establish “the presentation to the witnesses of both the original signature pages and the electronically witnessed copies within 30 days of the remote execution ceremony” – which the affidavit failed to do (see id.).

Finally, Surrogate Kelly referenced “other facts” suggesting that “there are counterparts of the [propounded] instrument that have not been filed with the Court” (see id.).  Such “other facts” required the petitioner to present all duplicate originals of the propounded will, “to provide assurance that the instrument was not revoked” (see id.).

Although Surrogate Kelly did not deny probate to the propounded will in Holmgren, the Surrogate did require the petitioner to provide a new self-proving affidavit establishing compliance with the Executive Order’s requirements (see id.).  Holmgren demonstrates that, to the extent that a testator relied upon the Executive Order in remotely executing a will, the self-proving affidavit filed to establish the instrument’s validity must show that the remote execution process complied with the Executive Order’s requirements.  Absent such a showing in a self-proving affidavit, a remotely executed will may not be admitted to probate, even in an uncontested proceeding.

The COVID-19 pandemic has forced litigants to wrestle with the dilemma of waiting for a jury trial or moving forward more expeditiously by way of a bench trial.  Recently, the Appellate Division, Fourth Department, and the Court of Appeals passed on the issue of undue influence arising out of a Surrogate’s Court bench trial.

In Matter of Kotsones, following a non-jury trial, the Surrogate’s Court denied a decedent’s will probate, and granted a petition to invalidate the decedent’s lifetime trust and certain lifetime real estate transactions.  The Surrogate’s Court determined that the will, trust, and real estate transactions, all part of the decedent’s estate plan, were the product of undue influence.  The Appellate Division reversed and the Court of Appeals affirmed.  The case provides a helpful summary of the law applicable to claims of undue influence, and New York appeals courts’ power on appeals from non-jury trials.

The case turned in large part on the issue of whether the alleged undue influencers were in a confidential relationship with the decedent.  The Appellate Division reiterated the well-settled rule that where a confidential relationship exists between the beneficiary and the decedent, an inference of undue influence will arise, and require the beneficiary to come forward with an explanation of the circumstances of the transaction, to demonstrate that it was fair and free from undue influence.

The Surrogate’s Court held that the petitioner alleging undue influence had met his initial burden of establishing the existence of the confidential relationship between the alleged undue influencers and the decedent.  The Appellate Division disagreed, observing that the hallmark of a confidential relationship is inequality in power and dealing.  The Appellate Division found that while the record established that the alleged undue influencers held a position of trust with decedent, and assisted the decedent with her finances, that decedent was actively and personally involved in managing her own financial affairs, and plainly stated her motives for her actions.  The Court held that under these circumstances, the petitioner failed to meet his initial burden of establishing that the relationship of the alleged undue influencers with the decedent was of such an unequal or controlling nature as to give rise to an inference of undue influence.

With no inference of undue influence, the Appellate Division reiterated that the heavy burden of proving undue influence requires a showing of the exercise of a moral coercion, which restrained independent action and destroyed free agency, or which, by importunity that could not be resisted, constrained the testator to do that which was against his or her free will.  The Appellate Division agreed with the trial court in finding that the alleged undue influencers wanted to benefit from decedent’s estate, and that one of them assisted decedent in preparing the estate plan and effectuating the transactions in question.  The Appellate Division held that “the relevant inquiry, however, is not what [the alleged undue influencers] may have wanted, asked for, or facilitated, but rather whether decedent’s free will, independent action, and self-agency were overcome by their conduct.”

According to the Appellate Division, the petitioner simply did not carry the heavy lift of his burden to prove undue influence.   The Appellate Division found that the record reflected that the decedent played an affirmative role in effecting the disputed transactions based on her stated personal motives, and that there was no indication that she, at any relevant time, lost her free will or agency.  Among the facts that the Appellate Division found compelling in reaching its conclusion was that the decedent had direct conversations with her attorney, instructing him to revise her estate plan, and explaining her motives for her desired changes.  The court also found it relevant that numerous non-beneficiaries established the decedent’s capacity and the decedent’s active management of her own affairs during the relevant time frame (albeit with the assistance of one of the alleged undue influencers).

The Court of Appeals affirmed the Appellate Division.  However, the Hon. Jenny Rivera dissented.  According to the dissent, the Appellate Division’s decision was predicated largely on trial testimony that the decedent participated in the contested transactions and revisions to her estate plan.  But the dissent looked at other testimony in the record, which suggested that the decedent’s participation was merely the result of the alleged undue influencers’ coercive influence.  The dissent’s view was that the Surrogate, who observed the trial testimony first hand and had the opportunity to see and hear the witnesses and assess their demeanor, was in a better position to assess credibility.

While it is impossible to know how the case would have been decided if it were tried before a jury, the standard of review would have been different on appeal.   Where the Appellate Division concludes that jury has made erroneous factual findings, the Appellate Division must order new trial, since it does not have power to make new findings of fact in an appeal arising from a jury verdict.  In non-jury cases, however, the Appellate Division does have power to make new findings of fact and change the verdict. Litigants should, of course, consider this among many other factors when deciding whether to wait or to proceed to a bench trial under the current circumstances.

Following up on the question posed in a post from a few years ago: when clients ask whether they can “sue for legal fees,” the courts continue to reiterate that the answer is almost always no; that the American Rule still controls.  Recent decisions in the contexts of trusts and estates litigation and guardianship litigation speak to fee shifting and exceptions to the American Rule.

Article 81 Guardianship Proceeding

In Matter of Milton R., the Appellate Division, Second Department, reversed the Nassau County Supreme Court’s (Daniel R. Palmieri, J.S.C.) orders and judgments awarding the petitioner legal fees under a fee shifting agreement on the law and the facts.  The case was decided in the context of a Mental Hygiene Law Article 81 Guardianship application where the petitioner sought twice to remove his brother as his father’s attorney-in-fact and health care agent, and twice failed in achieving this goal.

The initial guardianship proceeding settled by way of an agreement, whereby the respondent’s role as attorney-in-fact and health care agent was undisturbed.  The agreement contained a mandatory mediation provision, and also provided that the “prevailing party” in any litigation arising out of the agreement would be entitled to recover attorney’s fees from the defaulting party.   It was not long before the petitioner took his next shot to remove the respondent as his father’s attorney-in-fact and health care agent, alleging that the respondent breached the settlement agreement by, among other things, failing to provide home health care aides for his father as required under the agreement, and refusing to mediate under the settlement agreement’s alternative dispute resolution provisions.  Petitioner sought an award of attorney’s fees pursuant to the settlement agreement’s fee shifting provisions.

The court denied the petitioner’s request to remove respondent as his father’s attorney-in-fact and health care agent.  This was no surprise, because the courts ought to afford respect and deference to a person’s advance directives in the absence of any genuine and material defalcation.  However, the court ruled that the respondent breached the settlement agreement by refusing to mediate in accordance with the terms of the settlement agreement, and as a remedy for this breach, awarded attorney’s fees to petitioner pursuant to the settlement agreement’s fee shifting provision.  Thereafter, the court conducted an inquest to determine the amount of attorney’s fees to be awarded. Following the inquest, the court, inter alia, issued money judgments to the tune of approximately $175,000.

Without much discussion, the Appellate Division, Second Department corrected the motion court’s stark deviation from applicable law.  It applied the familiar rule that where an agreement provides for fee-shifting to a prevailing party, a party will only be determined a prevailing party if it is successful with respect to the central relief sought.  This determination requires consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope.  The Appellate Division Second Department determined that the petitioner achieved nothing, or at least nothing that could warrant shifting his investment of $175,000 into the litigation.  While the case is generally unremarkable, the takeaway might be that the Appellate Division did not find anything inherent in Article 81 guardianship proceedings that can justify deviation from the American Rule absent the explicit statutory exceptions in the Mental Hygiene Law or contract. The wide discretion granted to the trial courts in Article 81 Guardianship proceedings has its limits.

Trusts and Estates Litigation

Surrogate’s Court litigation often presents exceptions to the American Rule, and the Nassau County Surrogate’s recent order in the tortured estate of Oleg Cassini illustrates as much. The exceptions to the American Rule in estate litigation arise naturally because many claims against estate fiduciaries are derivative of the beneficiaries’ interests in the estate.

In Cassini, the Nassau County Surrogate cited the American Rule, but explained that in trusts and estates litigation there are circumstances where fees incurred by a beneficiary will be paid as an estate expense (as opposed to being borne by the beneficiary alone).  In certain cases, an attorney litigating on behalf of a beneficiary who has benefitted the entire estate through his or her services may be compensated from estate assets by order of the Surrogate.  This is by virtue of statutory authority, namely, Surrogate’s Court Procedure Act § 2110, which provides in subparagraphs (1) and (2), in relevant part:

At any time during the administration of an estate and irrespective of the pendency of a particular proceeding, the court is authorized to fix and determine the compensation of an attorney for services rendered to a fiduciary or to a devisee, legatee, distributee or any person interested … The court may direct payment therefor from the estate generally or from the funds in the hands of the fiduciary belonging to any legatee, devisee, distributee or person interested.

In Cassini, the Court allocated legal fees incurred by counsel on behalf of estate beneficiaries against the general estate on the grounds that it benefited the estate as a whole.  The Surrogate’s Courts have consistently followed this approach (and sniffed out and denied reimbursement of legal fees to beneficiaries who were acting for their own benefit), which can be considered an exception to the American Rule.

Further, as previously discussed by my colleagues, the Court of Appeals decision in Matter of Hyde has made it clear that the courts have great discretion to allocate legal fees in Surrogate’s Court litigation, as Surrogate’s Court Procedure Act § 2110 can be used as a fee shifting mechanism among warring parties to an estate litigation.  The Surrogate’s Courts have not been shy about exercising that discretion as illustrated by decisions that have issued since Hyde.

In the recent case Matter of Lee, New York County Surrogate’s Court granted a motion for summary determination that decedent’s father was disqualified as a distributee and beneficiary for failure to support decedent pursuant to EPTL 4-1.4 (a)(1) (Matter of Estate of Lee | NYLJ, Apr. 2, 2021, p.22, col 3 [Sur Ct, NY County 2021])

The court noted the tragic underlying facts. Decedent died at age 14, survived by his divorced parents. Decedent’s mother, who was the custodial parent and administrator of the estate, petitioned for the father’s disqualification and moved for summary judgment.

EPTL 4-1.4 (a)(1) provides two separate grounds for disqualification. A parent is denied a distributive share if he or she (1) fails to support, or (2) abandons the child while the child is under the age of 21, “unless the parental relationship and duties are subsequently resumed and continue until the death of the child” (id.).

The issue in Lee was not abandonment, but failure to support. Notably, a parent’s ability to pay support is essential to the calculus in determining disqualification on this ground pursuant to the statute.

The Surrogate’s decision relied on the Family Court’s 2008 determination of respondent’s support obligations after a hearing at which movant and respondent could present evidence and testify. The same Family Court decision held that respondent had willfully refused to pay child support and disallowed any downward modification of his support obligations. Movant showed that respondent owed a total child support arrears in the sum $74,294.49, and had paid only $3,955 for child support during the last five years of decedent’s life.

The court found that movant satisfied her burden that respondent not only failed to support decedent because he was unwilling, but never resumed payment to the extent of his ability prior to decedent’s death.

In opposing the motion, respondent contended that: (1) his support obligation fixed by the Family Court was inaccurate because it neglected the fact that he had no income during his incarceration in Afghanistan before his release in 2006; (2) movant sought to alienate him from decedent; and (3) the Family Court was biased against him based on his sexual orientation.

Applying the doctrine of res judicata, the court declined to take a second look at the propriety of respondent’s support obligations. However, it stated that the doctrine, which should not be mechanically applied, may allow a court to subsequently “examine a variety of non-exclusive factors to determine the preclusive effect, if any, of a prior judgment,” such as a significant change in law.

The “significant change in law” was the 2010 amendment to the Family Court Act § 451(3)(a) which allows modification of a child support order “upon a showing of a substantial change in circumstances.” Specifically, the amended law provided the following:

Incarceration shall not be considered voluntary unemployment and shall not be a bar to finding a substantial change in circumstances provided that such incarceration is not the result of non-payment of a child support order, or an offense against the custodial parent or child who is the subject of the order of judgment (Matter of Lee, supra).

Although this provision can be applied “retroactively [] to the date of filing of the petition to modify” (id.), the Surrogate found that respondent never followed through his petitions to modify the 2008 support determinations, and therefore, the court was restrained to find respondent’s claim barred by res judicata.

The Surrogate rejected respondent’s remaining arguments, finding that the alleged bias and alienation could have been raised in the Family Court or in an appeal. The court further found that the Family Court’s determination dispensed with the need for a hearing to determine respondent’s ability to pay, and movant’s ability to provide for decedent was no defense against respondent’s failure to support. Accordingly, the court held that respondent failed to resist the motion.

 

When thinking of the Surrogate’s Court, jurisdiction over eviction proceedings does not normally come to mind. Yet, over the past 18 months, the Surrogates of New York and Bronx counties have found cause to order an eviction from estate or trust property in order to facilitate its sale. Consider the following:

In In re Jenkins, 2020 NYLJ LEXIS 1723, the Surrogate’s Court, Bronx County, was confronted with an application, characterized as the equivalent of a proceeding pursuant to SCPA 1902, to sell the decedent’s interest in a parcel of realty, and to evict the decedent’s grandson from the premises. The application was supported by two of the decedent’s granddaughters. However, it was opposed by the decedent’s grandson, who stated that he wished to buy the realty, but for a price less than the contract price.  The court noted that courts have liberally granted SCPA 1902 (1), (6) and (7) applications to sell realty over the objections of some of the co-tenants in common who derived their interest in the realty from the decedent, provided that there is a sufficient nexus between the relief requested and the administration of the decedent’s estate.

The record revealed that the decedent died on August 18, 2006 owning several parcels of realty. Letters of administration issued to her son on June 12, 2007. Thereafter, one of the decedent’s granddaughters commenced a compulsory accounting proceeding in October, 2015 not only seeking an accounting for almost a decade of stagnation, but more importantly for payment of her distributive share.

In view of the foregoing, and the delay in administering and distributing the estate for the 14 year period since the decedent’s death, the court, although sympathetic to the decedent’s grandson, granted the petitioner’s application, and issued a warrant of eviction, which was stayed for thirty days in order to allow the grandson to vacate the premises voluntarily.

Prior to the decision in Jenkins, the Surrogate’s Court, New York County, (Anderson, S.) in In re Flender, 2019 NY Slip Op 33676(U), issued a warrant of eviction from trust property finding that it was in the best interests of the beneficiaries, and in keeping with the intent of the testator.

The subject proceeding had been commenced by the co-executors and co-trustees of the estate against the decedent’s daughter, her companion, and their two children. The decedent’s daughter opposed the application alleging that the executors had withheld a distribution of funds to which she, and/or a trust for her benefit, was entitled, and thus, effectively deprived her of her right to purchase the premises within the time frame authorized under the decedent’s will.  After denying the petitioners’ motion for summary judgment, the court held a three day evidentiary hearing to determine whether the daughters’ failure to purchase the property was due to petitioners’ abuse of discretion as trustees of trusts in which the daughter had a beneficial interest.

In determining that the petitioners acted properly in denying the daughter certain requested distributions, the court first considered the provisions of the decedent’s will which directed that the property be sold. Secondly, the court recognized that the will of the decedent expressly conferred absolute discretion on the petitioners as to how and when to invade the trust principal with which they were entrusted. The court noted that while this discretion could not be abused, where a fiduciary’s discretion is exercised in good faith, it may not be superseded by a court’s own sense of what might be wiser or fairer. Assessed within this context, the court found that there was no evidence of bad faith or misconduct in the petitioners’ refusal to make a substantial invasion of trust principal in order to enable the daughter to purchase the subject property, which was demonstrably beyond her means. Indeed, it appeared that the daughter would have been unable to maintain the property even if she obtained the requisite funds to satisfy the purchase price.

As such, the court found the record amply supported the petitioners’ conclusion that the daughter and other trust beneficiaries would be better served by avoiding depletion of the trust assets in order to enable the daughter to continue to reside in the property. In fact, the court observed that the decedent’s direction in his will that the premises be sold soon after her death reflected her intention that the property be utilized as a source of liquidity for his children’s trusts, an objective that would have been undermined by a reduction of the trust funds in order to accommodate the daughter’s requested invasion of principal.

Accordingly, the court granted the petitioners’ application, and directed a turnover of the premises, and that an order be settled providing for the issuance of a warrant of eviction.

Given the travel restrictions that have arisen during the COVID-19 pandemic, it is unlikely that many recently-commenced adult guardianship proceedings have led to jurisdictional disputes in courts in different states.  Pre-pandemic, however, in anticipation of commencing adult guardianship proceedings, parties moved the subjects of those proceedings from one state to another, presumably to gain a strategic advantage in forthcoming guardianship disputes.  Indeed, this happened so often that a majority of states in the Nation enacted a uniform law in order to address it.  This blog post addresses the New York version of that uniform law, and a New York case applying it to an interstate guardianship dispute, both of which are likely to be relied upon as pandemic-related travel restrictions ease, and interstate guardianship disputes become more common than they are at the moment.

The Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (“UAGPPJA”) is intended to “resolve jurisdiction issues in guardianship proceedings when two states have connections with the individual over whom guardianship is sought” (see Matter of J.D.S., 70 Misc3d 556, 558 [Sur Ct, New York County 2020]).  UAGPPJA does so by “providing a more streamlined and predictable process, saving state funds and conserving judicial resources, and reducing the possibility for abuse and expense of the alleged incapacitated person and that person’s family and caretakers” (see id.; Schwaber & Kafer, P.C. v Alpizar, Index No. 157599/2020, 2021 WL 408231, at *2 [Sup Ct, New York County Feb. 5, 2021]).  A majority of states in this Country have adopted UAGPPJA (see J.D.S., 70 Misc3d at 558).

As effective on April 21, 2014, New York’s version of UAGPPJA is codified in Article 83 (“Article 83”) of the Mental Hygiene Law (“MHL”) (see MHL § 83.01).  Article 83 applies to adult guardianships that parties commence under Article 81 of the MHL and Article 17-A (“Article 17-A”) of the Surrogate’s Court Procedure Act (“SCPA”) (see MHL § 83.15; SCPA § 1758[1]).[1]

In Matter of J.D.S., New York County Surrogate Rita Mella rendered what appears to be the first reported decision addressing whether a court in New York, or another state, was the appropriate forum for a guardianship dispute concerning a person under a disability (see J.D.S., 70 Misc3d at 557-65).  The proceeding concerned J.D.S., a thirty-five year-old respondent whose parents were divorced (see id.).  Prior to 2016, J.D.S. lived with his mother for the majority of his life, including a significant period of time in North Carolina (see id.).  In 2016, J.D.S. moved to New York to live with his father and stepmother (see id.).  In 2018, J.D.S. left New York to live with his mother (see id.).  In July 2018, the father filed a guardianship petition in North Carolina, which prompted the mother to do the same and ultimately gave rise to a consolidated guardianship proceeding in that state (see id.).  In September 2018, the father and stepmother commenced an Article 17-A guardianship proceeding, and petitioned for “a determination that New York is J.D.S.’s home state”, in New York County Surrogate’s Court (see id.).  In November 2018, a North Carolina court clerk advised the Surrogate’s Court that a North Carolina court had determined (a) North Carolina to be a “significant-connection state” under UAGPPJA, and (b) New York to be J.D.S.’s “home state” (see id.).  Surrogate Mella then held a hearing to determine whether to “exercise jurisdiction over this guardianship proceeding or if North Carolina . . . is the more appropriate forum” under Article 83 (see id.).

Based upon the evidence presented at the hearing, Surrogate Mella determined that North Carolina was a more appropriate forum for the guardianship dispute involving J.D.S. (see id.).  In doing so, the Surrogate relied upon the factors set forth in MHL § 83.23: (a) J.D.S.’s “expressed preference to stay in North Carolina”; (b) the absence of any evidence of abuse or neglect toward J.D.S., or any suggestion that “North Carolina was less capable of protecting J.D.S. from harm” than New York; (c) J.D.S. had spent significantly more time in North Carolina (with his mother) than in New York (with his father and stepmother); (d) J.D.S. was located significantly closer to the North Carolina guardianship court than the New York Surrogate’s Court; (e) J.D.S.’s assets were modest, and it would be less burdensome for J.D.S. to travel to a North Carolina guardianship court than to the New York Surrogate’s Court; (f) most of the witnesses who would testify at a guardianship hearing were located in North Carolina; (g) either the New York Surrogate’s Court or the North Carolina guardianship court would be well equipped to promptly determine whether to grant a guardianship of J.D.S.; (h) although the New York Surrogate’s Court had more recent familiarity with J.D.S., both the Surrogate’s Court and the North Carolina court had guardianship petitions concerning J.D.S. before them; and (i) nothing in the hearing record undermined a New York Guardian ad Litem’s conclusion that the North Carolina courts “are bound to play a more robust monitoring role than their New York counterparts under SCPA Article 17-A” (see id.).  Accordingly, pursuant to Article 83, Surrogate Mella declined to exercise jurisdiction over the New York Article 17-A guardianship proceeding (see id.).

As the first reported decision in which a New York court applied Article 83 to determine the appropriate forum for an adult guardianship dispute, J.D.S. provides an excellent roadmap for guardianship courts and practitioners who are confronted with interstate guardianship disputes.  Indeed, J.D.S. illustrates the factors that a New York court must consider in evaluating whether New York, or another state, should preside over an adult guardianship proceeding.

 

[1]             Article 83 also sets forth the process for transferring a guardianship granted in one state to another state (see MHL §§ 83.31 and 83.33).  This blog post does not address the guardianship transfer issue.

In an April 2020 post to this Blog entitled “The Remote Witnessing of Estate Planning Documents during the COVID-19 Pandemic,” my colleague Cheryl L. Erato addressed Governor Cuomo’s Executive Order authorizing the remote witnessing of wills.  Since April 2020, trusts and estates practitioners have questioned, from a public-policy perspective, how well the remote witnessing of wills works, and speculated about litigation that is anticipated to arise therefrom.

Until earlier this week, a Surrogate’s Court had not addressed the admission of a remotely witnessed will to probate.  By Decision and Order, dated January 25, 2021, Broome County Surrogate David H. Guy issued what appears to be the first reported New York decision addressing the admission to probate of a remotely witnessed will (see Matter of Ryan, 2021 NY Slip Op 21010 [Sur Ct, Broome County Jan. 25, 2021]).

In Matter of Ryan, the testator’s health quickly took a turn for the worse, causing the testator to be admitted to a hospital at a time when COVID-19 restrictions prevented visitors from entering the hospital.  As a result, the testator’s attorney’s office caused the testator’s original will to be delivered, in a sealed envelope, to the testator by a social worker at the hospital.

The testator’s counsel also arranged for the social worker to serve as a “videographer” for the testator’s execution of the will, using a cell phone camera for that purpose.  The testator’s counsel and two staff members from the attorney’s office virtually “‘attended’ and participated in the execution ceremony via a computer [in the attorney’s] office.”  Having previously received a copy of the testator’s driver’s license, the testator’s counsel and the attorney’s staff confirmed the testator’s identity during the execution ceremony.

After the testator opened the sealed envelope containing the will and reviewed the instrument, the testator affirmatively responded that “the instrument he was about to sign was his will,” and that “he wished for [the attorney’s] staff to serve as witnesses to the execution of [the]” will.  The testator signed the will, with the testator’s attorney and his staff watching the testator do so on their office computer.  “The cell phone angle was such that [the testator] could be seen signing the document in front of him.”  Immediately after the testator signed the will, “the original was driven back to [the testator’s attorney’s] office, where [the testator’s attorney’s] two staff executed the attestation clause and the witness affidavit, which had been stapled with the original will in a will cover.”

Relying upon Estates, Powers and Trusts Law (“EPTL”) § 3-2.1, Surrogate Guy found that the execution ceremony summarized above satisfied the statutory formalities for due execution of a will in New York.  The Surrogate reasoned that, although the testator “was not physically present in the same room as the witnesses, [the witnesses] were able to see him execute the will, in real time, using the cell phone camera and the computer.”  The Surrogate further reasoned that, given the COVID-19 restrictions that were in place at the time, the execution ceremony satisfied the “presence requirements” set forth in EPTL § 3-2.1.

Equally important, Surrogate Guy held that the testator’s execution of the will satisfied the provisions contained in the Executive Order authorizing the remote witnessing of wills.  The Surrogate explained that the “Executive Order anticipates that witnesses may sign an electronically transmitted copy of the signature page of the will and may, but are not required to, sign the original signature page of the will, if received within 30 days of its signature by the testator.”

While Ryan presents the first published decision in which a Surrogate’s Court addressed the remote witnessing of a will, Ryan certainly will not be the last one.  It will be interesting to see whether Surrogates in counties other than Broome County conclude that similar circumstances satisfy the statutory formalities set forth in EPTL § 3-2.1 and the Executive Order authorizing the remote witnessing of wills.