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DEFENDANT FOUND NOT GUILTY BY REASON OF INSANITY CAN BE SUED FOR WRONGFUL DEATH UNDER THE EPTL, BOTH FOR THE STABBING DEATH OF HIS MOTHER AND THE RELATED SUICIDE OF HIS BROTHER.

The First Department, reversing Supreme Court, determined the fact that defendant was found not guilty by reason of insanity in connection with the stabbing of his mother did not preclude wrongful death claims against him pursuant to EPTL 5-4.1, both for the death of his mother and the related suicide of his brother:

Although defendant was found not guilty by reason of mental disease or defect in connection with the stabbing death of his mother, the complaint stated a viable wrongful death claim against him pursuant to EPTL 5-4.1, since an insane person may be liable in tort for his actions … . A wrongful death claim was also stated on behalf of defendant’s brother, who committed suicide after his mother’s murder. Rosen v Schwartz, 2017 NY Slip Op 02517, 1st Dept 3-30-17

 

SURROGATE’S COURT HAD JURISDICTION TO ISSUE ANCILLARY LETTERS ALLOWING THE NONDOMICILIARY HEIR OF THE OWNER OF A $25 MILLION PAINTING CONFISCATED BY THE NAZIS TO SUE TO RECOVER THE PAINTING.

The First Department, in a full-fledged opinion by Justice Tom, determined Surrogate’s Court had jurisdiction to issue ancillary letters allowing the heir of the owner of a painting confiscated by the Nazis to sue to recover the painting. The International Art Center (IAC), which allegedly has possession of the painting in Switzerland, did not have standing to challenge the ancillary letters. The painting, “Seated Man with a Cane” by Modigliani, may be worth $25 million:

… [A]lthough the authority of the Surrogate’s Court over a nondomiciliary’s estate in an ancillary proceeding is generally limited to estate assets within New York … , property includes a “chose in action,” e.g. a cause of action in New York ,,, .

Accordingly, contrary to IAC’s contention, SCPA 206(1) does not require the physical presence of the subject property in New York at the time the proceeding for ancillary letters was commenced. It is sufficient that the Estate had a valid “chose in action” against two New York domiciliaries (the Nahmads), a New York corporation (the Gallery), and IAC, a foreign entity alleged to be owned and controlled by New York residents and doing business in New York.

In this case, personal jurisdiction [over IAC] was acquired based on IAC’s admitted agreement with Sotheby’s to act as its agent to sell the painting in New York in 2008. Further, personal jurisdiction over IAC may be based on respondents’ allegations that IAC transacted business in New York through the Nahmads at the Gallery’s office in Manhattan. Matter of Stettiner, 2017 NY Slip Op 01168, 1st Dept 2-14-17

 

TRUSTS AND ESTATES (SURROGATE’S COURT HAD JURISDICTON TO ISSUE ANCILLARY LETTERS ALLOWING THE NONDOMICILIARY HEIR OF THE OWNER OF A $25 MILLION PAINTING CONFISCATED BY THE NAZIS TO SUE TO RECOVER THE PAINTING)/ANCILLARY LETTERS (SURROGATE’S COURT HAD JURISDICTON TO ISSUE ANCILLARY LETTERS ALLOWING THE NONNDOMICILIARY HEIR OF THE OWNER OF A $25 MILLION PAINTING CONFISCATED BY THE NAZIS TO SUE TO RECOVER THE PAINTING)/PAINTINGS (SURROGATE’S COURT HAD JURISDICTON TO ISSUE ANCILLARY LETTERS ALLOWING THE NONDOMICILIARY HEIR OF THE OWNER OF A $25 MILLION PAINTING CONFISCATED BY THE NAZIS TO SUE TO RECOVER THE PAINTING)

BENEFICIARIES OF TRUST ENTITLED TO EXAMINE TRUSTEE ABOUT MATTERS RELATING TO ADMINISTRATION OF THE TRUST, BUT NOT APPOINTMENT OF THE TRUSTEE.

The Second Department determined the trust beneficiaries were entitled to examine the trustee about matters relating to administration of the trust but not matters related to his appointment as trustee:

SCPA 2211(2) provides, in pertinent part, that “[t]he fiduciary may be examined under oath by any party to the proceeding either before or after filing objections, if any, to the account, as to any matter relating to his or her administration of the estate.” The Surrogate’s Court providently exercised its discretion in granting the trustee’s motion for a protective order pursuant to CPLR 3103 vacating a notice of deposition served upon him by the trust’s beneficiaries … to the extent of vacating so much of the notice of deposition as sought to examine him as to “the manner in which he and Donald J. Farinacci became or were nominated as successor trustees and Donald J. Farinacci renounced such appointment,” as those issues exceeded the scope of SCPA 2211(2) … . However, under SCPA 2211(2), the trust beneficiaries were entitled to examine the trustee under oath “as to any matter relating to his or her administration of the estate.” Accordingly, the court erred in vacating the entirety of the notice of deposition … . Matter of Jane D. Ritter Revocable Living Trust., 2017 NY Slip Op 00647, 2nd Dept 2-1-17

TRUSTS AND ESTATES (BENEFICIARIES OF TRUST ENTITLED TO EXAMINE TRUSTEE ABOUT MATTERS RELATING TO ADMINISTRATION OF THE TRUST, BUT NOT APPOINTMENT OF THE TRUSTEE)/SURROGATE’S COURT PROCEDURE ACT (BENEFICIARIES OF TRUST ENTITLED TO EXAMINE TRUSTEE ABOUT MATTERS RELATING TO ADMINISTRATION OF THE TRUST, BUT NOT APPOINTMENT OF THE TRUSTEE)

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IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT.

In a case related to State of N.Y. Workers’ Compensation Bd. v Wang, 2017 NY Slip Op 00057, 3rd Dept 1-5-17, referenced immediately above, the Third Department, in a full-fledged opinion by Justice Garry (much too complex to summarize here), determined, inter alia, (1) the employer plaintiffs could sue as third-party beneficiaries of the contract between the workers’ compensation trust and its administrators, and (2) many of the employers’ noncontractual claims were properly dismissed as derivative, i.e., pertaining to the trust, rather than direct:

This Court recently held that an employer member of a group self-insured trust successfully alleges third-party beneficiary status by asserting “(1) the existence of a valid and binding contract between [the trust and its administrators], (2) that the contract was intended for [the employer member’s] benefit, and (3) that the benefit to [the employer member] is sufficiently immediate to indicate the assumption by [the trust and its administrators] of a duty to compensate it if the benefit is lost” … . * * *

Supreme Court dismissed many of [the noncontractual] causes of action upon determining that they belonged in the first instance to the trust rather than to the employer members and were thus derivative rather than direct. The distinction between derivative and direct claims is grounded upon the principle that a stockholder does not have an individual cause of action that derives from harm done to the corporation, but may bring a direct claim when “the wrongdoer has breached a duty owed directly to the shareholder which is independent of any duty owing to the corporation” … . In determining whether a claim is direct or derivative, a court must “look to the nature of the wrong and to whom the relief should go” and should consider “(1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)” … . Accredited Aides Plus, Inc. v Program Risk Mgt., Inc., 2017 NY Slip Op 00058, 3rd Dept 1-5-17

 

WORKERS’ COMPENSATION LAW  (IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)/TRUSTS AND ESTATES (WORKERS’ COMPENSATION TRUST, IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)/CONTRACT LAW (WORKERS’ COMPENSATION TRUST, IN A LAWSUIT BY EMPLOYERS AGAINST THE ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT, THE EMPLOYERS WERE DEEMED THIRD PARTY BENEFICIARIES OF THE CONTRACT BETWEEN THE ADMINISTRATORS AND THE TRUST, MANY OF THE EMPLOYERS’ NONCONTRACTUAL CLAIMS WERE PROPERLY DISMISSED AS DERIVATIVE (PERTAINING TO THE TRUST) RATHER THAN DIRECT)

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MANY (BUT NOT ALL) CAUSES OF ACTION ALLOWED TO GO FORWARD IN AN ACTION AGAINST ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT.

The Third Department, in a full-fledged opinion by Justice Egan, determined that certain causes of action can go forward in a lawsuit by the Workers’ Compensation Board against administrators and trustees of the Health Care Providers Self-Insurance Trust. The trust, which was to provide workers’ compensation coverage for the trust’s members, was found to be $188 million in debt. The opinion is fact-specific and much too detailed to be summarized here. Breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraud, negligent misrepresentation, breach of contract, breach of good faith and fair dealing, gross negligence, alter ego liability, among other theories, were alleged. Many causes of action were deemed time-barred. Some causes of action dismissed by Supreme Court were reinstated. State of N.Y. Workers’ Compensation Bd. v Wang, 2017 NY Slip Op 00057, 3rd Dept 1-5-17

 

WORKERS’ COMPENSATION LAW (MANY CAUSES OF ACTION ALLOWED TO GO FORWARD IN AN ACTION AGAINST ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT)/TRUSTS AND ESTATES (WORKERS’ COMPENSATION, MANY CAUSES OF ACTION ALLOWED TO GO FORWARD IN AN ACTION AGAINST ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT)/FIDUCIARY DUTY (TRUSTS AND ESTATES, MANY CAUSES OF ACTION ALLOWED TO GO FORWARD IN AN ACTION AGAINST ADMINISTRATORS AND TRUSTEES OF A WORKERS’ COMPENSATION TRUST FOUND TO BE $188 MILLION IN DEBT)

IN THIS WILL CONSTRUCTION PROCEEDING, ALTHOUGH THE WILL DID NOT ANTICIPATE DECEDENT’S HUSBAND WOULD DIE BEFORE HER, THE DECEDENT’S INTENT WAS CLEAR AND WAS PROPERLY ENFORCED BY SURROGATE’S COURT.

In this will construction proceeding, the Third Department determined Surrogate’s Court properly found that the decedent intended to benefit all ten children, including two stepchildren from her husband’s (Warren’s) prior marriage. The will did not anticipate that Warren would die before the decedent. If the laws of intestacy were applied, the two stepchildren would have been excluded. But because decedent’s contrary intent was clear, Surrogate’s Court properly ignored the laws of intestacy:

… [W]hile the residuary clause of the will is silent as to what would happen if decedent outlived Warren, all of her other testamentary dispositions evince the goal of equally dividing her assets among all 10 children, either at the time of her death or Warren’s death. There is nothing in the will to suggest that she intended a contrary result with regard to the residuary estate if Warren died before her, or that she had any interest in excluding petitioner and his sister from that part of her estate. The will implies the contrary and that decedent considered all 10 children as her own, as she named petitioner as one of several trustees in the will and regretted that she could not name all of her “other children” as well. Thus, Surrogate’s Court correctly “g[ave] effect to the expressed general testamentary plan and purpose of the testator” by implying a provision in decedent’s will leaving her residuary estate to all 10 children… . Matter of Warren, 2016 NY Slip Op 06925, 3rd Dept 10-20-16

TRUSTS AND ESTATES (IN THIS WILL CONSTRUCTION PROCEEDING, ALTHOUGH THE WILL DID NOT ANTICIPATE DECEDENT’S HUSBAND WOULD DIE BEFORE HER, THE DECEDENT’S INTENT WAS CLEAR AND WAS PROPERLY ENFORCED BY SURROGATE’S COURT)/WILLS (IN THIS WILL CONSTRUCTION PROCEEDING, ALTHOUGH THE WILL DID NOT ANTICIPATE DECEDENT’S HUSBAND WOULD DIE BEFORE HER, THE DECEDENT’S INTENT WAS CLEAR AND WAS PROPERLY ENFORCED BY SURROGATE’S COURT)/CONSTRUCTION PROCEEDING (WILLS, ALTHOUGH THE WILL DID NOT ANTICIPATE DECEDENT’S HUSBAND WOULD DIE BEFORE HER, THE DECEDENT’S INTENT WAS CLEAR AND WAS PROPERLY ENFORCED BY SURROGATE’S COURT)

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SUMMARY JUDGMENT PROPERLY GRANTED IN ACTIONS AGAINST EXECUTOR FOR BREACH OF FIDUCIARY DUTY AND NEGLIGENCE.

The Second Department determined summary judgment was properly granted in the objectants’ actions against the executor (Mahler) for breach of fiduciary duty and negligence.  The executor sold the estate asset (real property) to an acquaintance for half of its value. The acquaintance sold the property for nearly double the purchase price:

A fiduciary acting on behalf of an estate is required to employ such diligence and prudence to the care and management of the estate assets and affairs as would prudent persons of discretion and intelligence in their own like affairs … . “[A] fiduciary owes a duty of undivided and undiluted loyalty to those whose interests the fiduciary is to protect” … . In performing his fiduciary duty as the executor of the decedent’s estate, Mahler was required to use good business judgment … . To the extent that the sale of the property does not meet this standard, the beneficiaries of the estate may seek to surcharge him … . “To obtain such a surcharge, it is not enough for the contestants to show that the representatives of the estate did not get the highest price obtainable; it must be shown that they acted negligently, and with an absence of diligence and prudence which an ordinary [person] would exercise in his [or her] own affairs” … . Matter of Billmyer, 2016 NY Slip Op 05994, 2nd Dept 9-14-16

TRUSTS AND ESTATES (SUMMARY JUDGMENT PROPERLY GRANTED IN ACTIONS AGAINST EXECUTOR FOR BREACH OF FIDUCIARY DUTY AND NEGLIGENCE)/FIDUCIARY DUTY, BREACH OF (SUMMARY JUDGMENT PROPERLY GRANTED IN ACTIONS AGAINST EXECUTOR FOR BREACH OF FIDUCIARY DUTY AND NEGLIGENCE)/EXECUTORS (SUMMARY JUDGMENT PROPERLY GRANTED IN ACTIONS AGAINST EXECUTOR FOR BREACH OF FIDUCIARY DUTY AND NEGLIGENCE)

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CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS.

The Second Department determined, where father was ordered to procure life insurance to cover the children’s support and education costs, and where father died without complying with the order, a constructive trust on the proceeds of other life insurance policies was properly imposed in an amount sufficient to cover father’s support and education-expense obligations:

… [T]he Legislature has provided that a court may require a payor spouse to maintain life insurance to prevent that financial injury: “The court may also order a party to purchase, maintain or assign a policy of accident insurance or insurance on the life of either spouse, and to designate in the case of life insurance, either spouse or children of the marriage, or in the case of accident insurance, the insured spouse as irrevocable beneficiaries during a period of time fixed by the court. The obligation to provide such insurance shall cease upon the termination of the spouse’s duty to provide maintenance, child support or a distributive award” (Domestic Relations Law § 236[B][8][a]). The purpose of this provision is not to provide an alternative award of maintenance or child support, but solely to ensure that the spouse or children will receive the economic support for payments that would have been due had the payor spouse survived … . Accordingly, where life insurance is appropriate, it should be set in an amount sufficient to achieve that purpose … . It should not be in an amount that would provide a windfall … . Mayer v Mayer, 2016 NY Slip Op 05911, 2nd Dept 8-31-16

FAMILY LAW (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/INSURANCE LAW (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/CHILD SUPPORT (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)/TRUSTS AND ESTATES (CONSTRUCTIVE TRUST PROPERLY IMPOSED UPON THE PROCEEDS OF LIFE INSURANCE TO COVER CHILD SUPPORT AND EDUCATION COSTS)

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MORE THAN A YEAR’S DELAY IN PUBLIC ADMINISTRATOR’S SEEKING SUBSTITUTION FOR DECEASED IN A MEDICAL MALPRACTICE ACTION ADEQUATELY EXPLAINED.

The First Department, over a dissent, determined the Public Administrator’s late motion (CPLR 1021) for substitution (for the deceased plaintiff) in a medical malpractice action was properly granted. There was a delay of more than one year after letters testamentary were issued before substitution was sought. The delay was essentially caused by law office failure. With respect to a reasonable excuse for the delay, the court wrote:

… [T]he record shows that there was a dispute between two of [the deceased’s] children as to who would administer the estate, and that the Public Administrator’s counsel was on maternity leave for five months. In addition, in this case, inadvertent errors in drafting the agreement to retain counsel accounted for some of the delay. Thus, … there are circumstances present that “adequately explain[] the delay in issue” … . Public Adm’r, as Adm’r of the Estate of Ronald Simpson v Levine, 2016 NY Slip Op 05896, 1st Dept 8-25-16

 

TRUSTS AND ESTATES (MORE THAN A YEAR’S DELAY IN PUBLIC ADMINISTRATOR’S SEEKING SUBSTITUTION FOR DECEASED IN A MEDICAL MALPRACTICE ACTION ADEQUATELY EXPLAINED)/CIVIL PROCEDURE (TRUSTS AND ESTATES, MORE THAN A YEAR’S DELAY IN PUBLIC ADMINISTRATOR’S SEEKING SUBSTITUTION FOR DECEASED IN A MEDICAL MALPRACTICE ACTION ADEQUATELY EXPLAINED)

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LIFE ESTATES IN A CONDOMINIUM AND COOPERATIVE APARTMENT DID NOT DIMINISH VALUE OF THE PROPERTIES FOR ESTATE TAX PURPOSES.

The Second Department determined the value of properties transferred upon decedent's death was the fair market value at the time of death. The fact that decedent willed life estates in the properties did not diminish the value of the properties for estate tax purposes:

“Because the estate tax is a tax on the privilege of transferring property upon one's death, the property to be valued for estate tax purposes is that which the decedent actually transfers at his death rather than the interest held by the decedent before death or that held by the legatee after death” … . An estate tax taxes “not the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death” … . “The value of every item of property includible in a decedent's gross estate … is its fair market value at the time of the decedent's death” … . An estate tax is a tax on the privilege of passing on property, not a tax on the privilege of receiving property; “[t]he tax is on the act of the testator not on the receipt of the property by the legatees” … .

Therefore, contrary to the petitioner's contention, the life estates in the condominium and cooperative apartment granted by the decedent to his longtime companion upon the decedent's death did not diminish the value of those properties for estate tax purposes and should not have been taken into account on the estate tax return. Matter of Cleary, 2016 NY Slip Op 04410, 2nd Dept 6-8-16

TRUSTS AND ESTATES (LIFE ESTATES IN A CONDOMINIUM AND COOPERATIVE APARTMENT DID NOT DIMINISH VALUE OF THE PROPERTIES FOR ESTATE TAX PURPOSES)/TAX LAW (ESTATE TAX, (LIFE ESTATES IN A CONDOMINIUM AND COOPERATIVE APARTMENT DID NOT DIMINISH VALUE OF THE PROPERTIES FOR ESTATE TAX PURPOSES)/ESTATE TAX (LIFE ESTATES IN A CONDOMINIUM AND COOPERATIVE APARTMENT DID NOT DIMINISH VALUE OF THE PROPERTIES FOR ESTATE TAX PURPOSES)

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