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THERE WAS NO SHOWING THAT THE ALLEGEDLY DISABLED PERSON WAS NOT COMPETENT IN 2015 WHEN THE SHORT FORM POWER OF ATTORNEY WAS EXECUTED, THEREFORE THE ATTORNEY-IN-FACT HAD THE AUTHORITY TO CREATE A SUPPLEMENTAL NEEDS TRUST FOR THE ALLEGEDLY DISABLED PERSON (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined the short form power of attorney executed in 2015 by Delaney, an allegedly disabled person, was valid and allowed the attorney-in-fact, Pacchiana, to set up a supplemental needs trust for Delaney:

To be valid, a statutory short form power of attorney must “[b]e signed and dated by a principal with capacity, with the signature of the principal duly acknowledged in the manner prescribed for the acknowledgment of a conveyance of real property” (General Obligations Law § 5-1501B[1][b] … ). “Capacity” is defined as the “ability to comprehend the nature and consequences of the act of executing and granting, revoking, amending or modifying a power of attorney, any provision in a power of attorney, or the authority of any person to act as agent under a power of attorney” (General Obligations Law § 5-1501[2][c]). “A party’s competence to enter into a transaction is presumed, even if the party suffers from a condition affecting cognitive function, and the party asserting incapacity bears the burden of proof'” … . “The incapacity must be shown to exist at the time the pertinent document was executed” … . Such incapacity was not shown here … .

Pacchiana, as Delaney’s attorney-in-fact, had the authority to commence a proceeding in the Surrogate’s Court for the creation of a supplemental trust in Delaney’s behalf (see General Obligations Law § 5-1502H …). Matter of Delaney, 2019 NY Slip Op 02090, Second Dept 3-20-19

 

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$1 MILLION ATTORNEY’S FEE REQUEST CUT IN HALF BY SURROGATE’S COURT AND REDUCED A FURTHER $100,000 BY THE FIRST DEPT CITING EXCESSIVE CHARGES FOR IN-FIRM DISCUSSIONS AND UNNECESSARY WORK (FIRST DEPT).

The First Department determined Surrogate’s Court properly reduced by half the $1 million attorney’s-fees request, which represented 1/3 of the estate and trust assets. First Department further reduced the fees by another $100,000:

Respondent’s counsel sought approval for legal fees in the amount of $1,037,183 for their representation of respondent. The amount requested represented 33.7% of the estate and trust assets. The Surrogate noted that the fees were far in excess of a typical fee for the services performed by respondent’s counsel, concluded that the fees were excessive, and fixed the fees in the total amount of $520,000.

Although the Surrogate reduced the fees from the exorbitant amount originally requested, we conclude that the fees as reduced are still excessive given the size of the estate … . While there is no set formula for fee awards, upon our review of counsel’s time records and in the exercise of discretion, we conclude that a further reduction in the amount of $100,000 is warranted. This additional reduction is necessary to properly account for excessive charges for inter-office communications and discussions amongst members of the firm, and unnecessary work performed … . Matter of SR, 2019 NY Slip Op 01343, First Dept 2-26-19

 

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EMPLOYEE’S ESTATE ENTITLED TO THE AMOUNT OF THE SCHEDULE LOSS OF USE AWARD THAT ACCRUED UP UNTIL THE EMPLOYEE’S DEATH, NOT THE ENTIRE SLU AWARD (THIRD DEPT).

The Third Department determined that the employee’s estate was entitled to the portion of the schedule loss of use (SLU) award that had accrued up until the time of the employee’s death:

In our view, the 2009 statutory amendments did not alter the longstanding rule that, where an injured employee dies without leaving a surviving spouse, child under 18 years old or dependent, only that portion of the employee’s SLU award that had accrued at the time of the death is payable to the estate, along with reasonable funeral expenses… . Nor did, as claimant contends, the amendments alter the rate at which an SLU award accrues to an injured employee who is posthumously awarded SLU benefits. Absent clear statutory language or an indication of statutory intent, we cannot conclude that, in granting the option of a lump-sum payment, the Legislature intended for the employee’s estate to collect any portion of the posthumous SLU award that had not accrued prior to death. Accordingly, claimant was not entitled to the entirety of decedent’s SLU award. Matter of Estate of Youngjohn v Berry Plastics Corp., 2019 NY Slip Op 01290, Third Dept 2-21-19

 

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COURT ORDER WAS AMBIGUOUS AND ERRONEOUS AND COULD NOT THEREFORE BE THE BASIS OF A CONTEMPT FINDING AND SANCTIONS (THIRD DEPT). ​

The Third Department, reversing Supreme Court, in a proceeding concerning the guardianship and trust assets of a disabled person, determined the trustee should not have been held in contempt based upon an ambiguous and erroneous court order and sanctions against the trustee were not justified in light of the ambiguity of and error in the order:

… [W]e find that, however uncooperative and dilatory the trustee was, [the court evaluator] did not demonstrate by clear and convincing evidence that the trustee violated a “lawful, clear and unequivocal order” when he did not pay the fee award from the unfunded, unexecuted 2006 SNT [supplemental needs trust] as directed in the ex parte order and when he instead cross-moved to vacate that order … . Moreover, given that the ex parte order referred to an incorrect SNT, which was not funded or executed, an error of which Supreme Court was made aware, the court should have granted the trustee’s motion to vacate the ex parte order … . …

A court may, in its discretion, award any party or counsel in a civil matter “costs in the form of reimbursement for actual expenses reasonably incurred and reasonable [counsel] fees, resulting from frivolous conduct” and “may impose financial sanctions upon any party or attorney” for frivolous conduct … . … However, such sanctions and costs may be imposed “only upon a written decision setting forth the conduct on which the award or imposition is based, the reasons why the court found the conduct to be frivolous, and the reasons why the court found the amount awarded or imposed to be appropriate” … . …  [G]iven … the fact that the court orders were ambiguous or directed payment out of an incorrect, unfunded SNT, the trustee’s conduct in response to those orders, much of it based upon the advice of counsel, was not shown to be frivolous … . Matter of James H., 2019 NY Slip Op 00170, Second Dept 1-10-19

 

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GENERAL BUSINESS LAW 349 CAUSE OF ACTION AGAINST A WORKERS’ COMPENSATION LAW TRUST SHOULD NOT HAVE BEEN DISMISSED (THIRD DEPT).

The Third Department determined that a General Business Law 349 cause of action against a Workers’ Compensation Law trust should not have been dismissed. The trust was taken over by the Workers’ Compensation Board and was found to have a deficit of $220 million. Several lawsuits were brought by members of the trust alleging breach of contract, fraud, breach of a fiduciary duty, etc.:

… [W]ith respect to the General Business Law § 349 cause of action [we] disagree with Supreme Court’s reasoning that the alleged misconduct was not consumer oriented.

“The threshold requirement of consumer-oriented conduct is met by a showing that the acts or practices have a broader impact on consumers at large in that they are directed to consumers or potentially affect similarly situated consumers” … . The amended complaint alleged that “[d]efendants aggressively marketed and advised the [t]rust and self-insurance trusts to the public at large in general as a safe and less expensive alternative to traditional insurance” and that “the information disseminated by [d]efendants was likely to mislead reasonable employers.” The amended complaint further alleged that defendants’ actions “injured and harmed [p]laintiffs, other members of self-insured trusts and the general public” and have “jeopardized the workers’ compensation benefits of New York employers and their employees.” Construing these allegations liberally, as we must, we find that plaintiffs sufficiently alleged that the misconduct at issue was consumer oriented … . Belair Care Ctr., Inc. v Cool Insuring Agency, Inc., 2019 NY Slip Op 00015, Third Dept 1-3-19

 

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MOTION TO SUBSTITUTE THE ADMINISTRATRIX OF PLAINTIFF’S ESTATE FOR THE DECEASED PLAINTIFF PROPERLY DENIED BECAUSE THE DELAY IN SEEKING SUBSTITUTION WAS NOT EXPLAINED, THE MERITS WERE NOT DESCRIBED, AND THE EXISTENCE OF PREJUDICE WAS NOT REBUTTED, HOWEVER THE ACTION COULD NOT BE DISMISSED ABSENT THE SUBSTITUTION OF A LEGAL REPRESENTATIVE (SECOND DEPT).

The Second Department agreed with Supreme Court’s denial of a motion to substitute plaintiff’s daughter, as administratrix, for the deceased plaintiff in an action because the delay in seeking substitution was not explained, the merits of the action were not described, and the presumption of prejudice was not rebutted. But the Second Department noted that the action should not have been dismissed because the plaintiff’s stayed all proceedings pending substitution:

CPLR 1021 provides, in part, that “[a] motion for substitution may be made by the successors or representatives of a party or by any party.” Although a determination rendered without such substitution will generally be deemed a nullity, determinations regarding substitution pursuant to CPLR 1021 are a necessary exception to the general rule, and the court does not lack jurisdiction to consider such a motion … . Here, the Supreme Court had jurisdiction to consider those branches of the motion which were pursuant to CPLR 1015 for leave to substitute the plaintiff’s daughter as the plaintiff and, upon substitution, to restore the action thereafter (see CPLR 1021). On the merits, we agree with the court’s determination to deny those branches of the motion given the failure to provide any detailed excuse for the delay in seeking substitution, the failure to include an affidavit of merit demonstrating that the claim against Rehab was potentially meritorious, and the failure to rebut Rehab’s claim of prejudice stemming from the delay … .

However, since the plaintiff’s death triggered a stay of all proceedings in the action pending substitution of a legal representative … , the Supreme Court should not have directed dismissal of the action pursuant to CPLR 3404, as the order was issued after the plaintiff’s death and in the absence of any substitution of a legal representative … . Medlock v Dr. William O. Benenson Rehabilitation Pavilion, 2018 NY Slip Op 08922, Second Dept 12-26-18

 

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COUNTERCLAIMS AGAINST INDIVIDUAL TRUSTEES RELATED BACK TO THE COUNTERCLAIMS AGAINST THE TRUST AND THEREFORE WERE NOT TIME-BARRED, SUPREME COURT REVERSED (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the counterclaims against the trustees of the plaintiff workers’ compensation self-insurance trust should not have been dismissed as time-barred because they related back to the counterclaims against the trust:

Supreme Court determined that, because defendant was aware of the identity of the trustees when it interposed its original answer and counterclaims in September 2010, its failure to assert claims against the individual trustees between September 2010 and December 2016 represented “either a strategic litigation decision on its part or a mistake of law,” neither of which it found would entitle defendant to application of the doctrine. We disagree.

There is nothing in the record before us demonstrating that defendant intentionally elected not to assert its counterclaims against the individual trustees and/or that it did so to obtain “a tactical advantage in the litigation” … . A review of defendant’s pleadings demonstrates that it intended to sue the individual trustees … . Although the specific names of the individual trustees could have been ascertained from certain documentation that the trust provided to defendant on an annual basis, “we need no longer consider whether [such a] mistake was excusable” … . Rather, as the Court of Appeals has recognized, the primary question — and “the linchpin of the relation back doctrine” — is whether the newly added party had actual notice of the claim … . As trustees of the trust, we find it implausible that the individual trustees were not aware of the trust’s commencement of this action and the counterclaims that defendant asserted against the trust — such knowledge being imputed to them as trustees … . NYAHSA Servs., Inc., Self-Ins. Trust v People Care Inc., 2018 NY Slip Op 08735 [167 AD3d 1305], Third Dept 12-20-18

 

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ONLY SERIOUS MISCONDUCT, NOT CONFLICTS OF INTEREST, JUSTIFIES REMOVAL OF NAMED EXECUTORS, SURROGATE’S COURT REVERSED, MATTER SENT BACK FOR A HEARING (THIRD DEPT).

The Third Department, reversing Surrogate’s Court, determined that the petition seeking letters of administration on the ground that respondents, who were the named executors, had conflicts of interest and had breached their fiduciary duties, should not have been granted. The court explained that named executors can be removed only for serious misconduct, not conflicts of interest. The matter was sent back for a hearing:

“‘[I]t is actual misconduct, not a conflict of interest, that justifies the removal of a fiduciary'”… . Simply put, “a conflict does not make a fiduciary ineligible under SCPA 707, and public policy zealously protects the decedent’s right to name a fiduciary, even one with a conflict” … . Thus, petitioners’ remedy for the alleged conflict of interest lies not in the ineligibility provisions of SCPA 707, but in the provisions of SCPA 702 authorizing the issuance of limited and restricted letters of administration under certain enumerated circumstances.

To that end, SCPA 702 (9) specifically provides for the issuance of limited letters of administration to a party for the purpose of commencing “any action or proceeding against the fiduciary, in his or her individual capacity, or against anyone else against whom the fiduciary fails or refuses to bring such a proceeding.” Indeed, this subdivision is designed to preserve a decedent’s choice of fiduciary “by permitting the appointment of a second limited administrator instead of requiring the disqualification or removal of original fiduciaries where their conflicts of interests preclude them from pursuing claims against themselves or others to the prejudice of other persons interested in the estate” … . For these reasons, we conclude that the conflict alleged did not render respondents ineligible to serve as fiduciaries of decedent’s estate under SCPA 707. Matter of Bolen, 2018 NY Slip Op 08001, Third Dept 11-21-18

TRUSTS AND ESTATES (EXECUTORS, ONLY SERIOUS MISCONDUCT, NOT CONFLICTS OF INTEREST, JUSTIFIES REMOVAL OF NAMED EXECUTORS, SURROGATE’S COURT REVERSED, MATTER SENT BACK FOR A HEARING (THIRD DEPT))/FIDUCIARY DUTY (TRUSTS AND ESTATES, EXECUTORS, ONLY SERIOUS MISCONDUCT, NOT CONFLICTS OF INTEREST, JUSTIFIES REMOVAL OF NAMED EXECUTORS, SURROGATE’S COURT REVERSED, MATTER SENT BACK FOR A HEARING (THIRD DEPT))/EXECUTORS (TRUSTS AND ESTATES, ONLY SERIOUS MISCONDUCT, NOT CONFLICTS OF INTEREST, JUSTIFIES REMOVAL OF NAMED EXECUTORS, SURROGATE’S COURT REVERSED, MATTER SENT BACK FOR A HEARING (THIRD DEPT))

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DECEDENT DIED INTESTATE, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT). ​

The Second Department, reversing Surrogate’s Court, determined deeds executed by decedent’s cotenants should not have been set aside. Because decedent died intestate, the cotenants’ interests in the real property vested upon death and the cotenants could validly convey their interests in the property:

The Surrogate’s Court should not have granted those branches of the petition which sought to set aside the subject deeds and to determine that title to the subject property was vested in the decedent’s estate. When the decedent died intestate, title to the subject property automatically vested in her distributees as tenants in common … . “[W]hen a cotenant who has a partial interest in real property executes a deed that purports to convey full title to the property, the deed is not entirely void; rather, the deed is effective, but only to the extent of conveying the grantor’s interest in the property” … . Matter of Blango, 2018 NY Slip Op 07721, Second Dept 11-14-18

REAL PROPERTY LAW (DECEDENT DIED INTESTATE, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT))/TRUSTS AND ESTATES (REAL PROPERTY, COTENANTS, DECEDENT DIED INTESTATE, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT))/TENANTS IN COMMON (TRUSTS AND ESTATES, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT))/TRUSTS AND ESTATES (REAL PROPERTY LAW, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT))/DEEDS (TRUSTS AND ESTATES, TENANTS IN COMMON, COTENANTS’ INTERESTS IN THE REAL PROPERTY VESTED UPON DEATH, COTENANTS COULD THEREFORE CONVEY THEIR INTERESTS IN THE PROPERTY, SURROGATE’S COURT SHOULD NOT HAVE SET ASIDE DEEDS (SECOND DEPT))

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PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined that petitioner had standing to seek the appointment of an administrator of the estate of the decedent who was a party, along with petitioner, is several actions which resulted in appeals pending before the Second Department:

In this proceeding, the petitioner, the founder of Five Towns College, seeks the appointment of an administrator for the estate of John D. Quinn (hereinafter the decedent), a former member of the college’s board of trustees. Prior to the decedent’s death, the petitioner and decedent were parties in a number of actions that resulted in four appeals pending before this Court … . Those appeals were automatically stayed pending the substitution of a legal representative for the decedent pursuant to CPLR 1015(a).

The Surrogate’s Court dismissed the petition, finding that the petitioner lacked standing to bring the petition. The petitioner, in effect, moved for leave to reargue the dismissal of the petition, and upon reargument, the court adhered to its original determination.

Upon reargument, the Surrogate’s Court should have found that the petitioner has standing to bring the petition. SCPA 1002(1) provides, in relevant part, that “a person interested in an action . . . in which the intestate . . . , if living, would be a proper party may present a petition to the court having jurisdiction praying for a decree granting letters of administration to him or to another person upon the estate of the intestate.” In this case, the decedent was named as a party in the actions in which appeals are pending before this Court, and the petitioner, as a defendant in those actions and an appellant before this Court, has an interest in those actions. Thus, pursuant to SCPA 1002(1), the petitioner has standing to petition the Surrogate’s Court for the appointment of an administrator for the decedent’s estate. Matter of Quinn, 2018 NY Slip Op 07433, Second Dept 11-7-18

TRUSTS AND ESTATES (PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT))/CIVIL PROCEDURE (TRUSTS AND ESTATES, PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT))/APPEALS (TRUSTS AND ESTATES, CIVIL PROCEDURE, (PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT))/SURROGATE’S COURT PROCEDURE ACT (SPCA) (PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT))/CPLR 1015 (TRUSTS AND ESTATES, PETITIONER WAS A PARTY ALONG WITH DECEDENT IN SEVERAL ACTIONS WHICH RESULTED IN PENDING APPEALS, PETITIONER THEREFORE HAD STANDING TO SEEK THE APPOINTMENT OF AN ADMINISTRATOR OF THE ESTATE OF THE DECEDENT, SURROGATE’S COURT REVERSED (SECOND DEPT))

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