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EXECUTOR-STATUS (PRIOR TO DEATH) AND FAMILIAL RELATIONSHIP DO NOT CREATE A FIDUCIARY RELATIONSHIP, EQUITABLE ESTOPPEL SHOULD NOT HAVE BEEN INVOKED TO SAVE A TIME-BARRED CLAIM.

The Third Department, over a two-justice dissent, determined the doctrine of equitable estoppel should not have been invoked to save a time-barred claim to real property. The real property was the subject of a 1977 will which placed the property in trust for decedent's children and named defendant executor. In 1988 the property was conveyed to the defendant, but the will was never amended. Supreme Court denied defendant's motion to dismiss, finding that defendant's executor-status and familial ties created a fiduciary relationship, requiring defendant to notify plaintiffs of the 1988 transfer. The Third Department held the appointment as executor did not create a fiduciary relationship (prior to death), and the familial relationship, as well, did not create a fiduciary relationship. Therefore, the Third Department ruled, the defendant was not barred, by equitable estoppel, from asserting the statute of limitations defense:

Supreme Court recognized that “concealment without actual misrepresentation may form the basis for invocation of the doctrine [of equitable estoppel] if 'there was a fiduciary relationship which gave [the] defendant an obligation to inform [the] plaintiff of facts underlying the claim'” … . Here, the court found that plaintiffs had sufficiently alleged that defendant owed them a fiduciary duty to disclose the conveyance when it occurred in 1988 because of her nomination as executor-trustee in the 1977 will, as well as their familial relationship.

We note, however, that the existence of a familial relationship does not equate to a fiduciary relationship for equitable estoppel purposes … . Nor does the mere fact that a will has nominated an executor, in and of itself, create a fiduciary relationship between the nominee and the will's beneficiaries. Indeed, because of the ambulatory nature of a will, a nominated executor is prohibited from acting in a fiduciary capacity until the testator dies … . Similarly, “a testamentary trust cannot become effective prior to the testator's death” … . Picard v Fish, 2016 NY Slip Op 04086, 3rd Dept 5-26-16

CIVIL PROCEDURE (EXECUTOR-STATUS (PRIOR TO DEATH) AND FAMILIAL RELATIONSHIP DO NOT CREATE A FIDUCIARY RELATIONSHIP, EQUITABLE ESTOPPEL SHOULD NOT HAVE BEEN INVOKED TO BAR A TIME-BARRED CLAIM)/EQUITABLE ESTOPPEL (EXECUTOR-STATUS (PRIOR TO DEATH) AND FAMILIAL RELATIONSHIP DO NOT CREATE A FIDUCIARY RELATIONSHIP, EQUITABLE ESTOPPEL SHOULD NOT HAVE BEEN INVOKED TO BAR A TIME-BARRED CLAIM)/TRUSTS AND ESTATES (EXECUTOR-STATUS (PRIOR TO DEATH) AND FAMILIAL RELATIONSHIP DO NOT CREATE A FIDUCIARY RELATIONSHIP, EQUITABLE ESTOPPEL SHOULD NOT HAVE BEEN INVOKED TO BAR A TIME-BARRED CLAIM)

BENEFICIARIES OF ESTATE DID NOT HAVE STANDING TO BRING AN ACTION TO PRESERVE AN ESTATE ASSET, ONLY THE PERSONAL REPRESENTATIVE OF THE ESTATE HAS THAT POWER.

The Second Department determined plaintiffs, who were beneficiaries of decedent's estate, did not have standing to bring an action seeking to recover and preserve an asset allegedly wrongfully diverted from decedent's estate prior to her death. Only a personal representative of the estate could bring the action:

EPTL 11-3.2(b) provides that a cause of action for injury to person or property is not lost because of the death of the person in whose favor the cause of action existed, as the cause of action may be commenced or continued by the decedent's personal representative. “[A] beneficiary, absent extraordinary circumstances . . . , cannot act on behalf of [an] estate or exercise [a] fiduciary's rights with respect to estate property” … . Rather, “[t]he appropriate avenue is to be appointed a representative pursuant to the requirements of the EPTL” … .

Here, the Supreme Court correctly determined that the plaintiffs lacked standing to commence an action to recover and preserve an asset alleged to have been wrongfully diverted from the decedent's estate prior to her death … . The plaintiffs, as individual beneficiaries of the decedent's estate, had no independent right to maintain an independent cause of action for the recovery of estate property, as such a right belonged to the personal representative of the decedent's estate … . Stallsworth v Stallsworth, 2016 NY Slip Op 03161, 2nd Dept 4-27-16


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MORTGAGE HAD PRIORITY OVER COUNTY’S CLAIM FOR REIMBURSEMENT OF MEDICAID BENEFITS.

The Third Department determined a mortgage held by Wells Fargo had priority to a claim by the county seeking reimbursement of Medicaid benefits received by the decedent:

 

Petitioner [Saratoga County Department of Social Services] asserts priority pursuant to Social Services Law § 104 (1), which provides, in relevant part, that “[i]n all claims of the public welfare official made under [such] section[,] the public welfare official shall be deemed a preferred creditor” (emphasis added). “Preferred creditor” has been construed to give a social services department priority over a “general creditor, that is, a creditor that, upon giving credit, takes no rights against specific property of a debtor” … . Here, Wells Fargo holds a mortgage lien against the Rotterdam property that was recorded prior to the May 2014 decree of Surrogate's Court validating petitioner's claim. Although Medicaid assistance was provided to decedent before the mortgage was given, petitioner did not have a prior lien against the property (see Social Services Law § 369 [2] [a]). As such, we conclude that Wells Fargo's prior specific lien gives it priority over petitioner's claim with respect to the … property … . Matter of Shambo, 2016 NY Slip Op 02699, 3rd Dept 4-7-16


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FIDUCIARY EXCEPTION TO THE USUAL BURDEN OF PROOF IN A CONSTRUCTIVE FRAUD ACTION DID NOT APPLY, FIDUCIARIES WERE NOT PARTIES TO THE RELEVANT DOCUMENTS AND DID NOT STAND TO BENEFIT FROM THE PROVISIONS OF THE DOCUMENTS.

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over a two-judge dissenting opinion, determined an affirmative defense alleging constructive fraud on the part of attorneys who drafted irrevocable releases of powers of appointment of trust assets was properly dismissed by the Appellate Division. The Benihana Protective Trust (BPT) was formed by Rocky, the founder of the Benihana restaurant chain. The irrevocable releases of powers of appointment allowed disposition of the trust assets only to Rocky's descendants. However, irrespective of the releases, Rocky's will attempted to pass trust assets to his wife. Rocky indicated in a deposition that he would not have signed the releases had he known they would prohibit the disposition of trust assets to his wife. Upon Rocky's death, Rocky's wife sought to have the releases declared invalid under a fiduciary constructive-fraud theory. Rocky's wife argued that the fiduciary exception to the usual constructive fraud proof requirements shifted the burden to the trust beneficiaries to prove the releases were not procured by fraud. Rejecting the applicability of the fiduciary exception, the court affirmed the Appellate Division's grant of summary judgment in favor of the trust beneficiaries:

It is a well-settled rule that “'fraud vitiates all contracts, but as a general thing it is not presumed but must be proved by the party seeking to [be] relieve[d] . . . from an obligation on that ground'” … . However, an exception to that general rule provides that where a fiduciary relationship exists between the parties, the law of constructive fraud will operate to shift the burden to the party seeking to uphold the transaction to demonstrate the absence of fraud … . * * *

[The attorneys who drafted the Releases] were clearly Rocky's fiduciaries. But that is only one part of the equation. The critical inquiry is whether they were either parties to the Releases or stood to directly benefit from their execution, such that the burden shifted to [trust beneficiaries] to demonstrate that the Releases were not procured by fraud.

Here, the only individuals who stood to benefit from Rocky's execution of the Releases were his descendants. [The attorneys] were [not] parties to the Releases [and did not] to directly benefit from their execution … . If anything, the execution of the Releases all but ensured that [the attorneys] would have no interest in, nor would receive any benefit from, the trust assets. Therefore, the Appellate Division correctly determined that, because the fiduciary exception does not apply in this case, the Surrogate had improperly shifted the burden of proof to [the trust beneficiaries] to demonstrate that the Releases were not procured by fraud. Matter of Aoki v Aoki, 2016 NY Slip Op 02474, CtApp 3-31-16

FRAUD (FIDUCIARY EXCEPTION TO THE USUAL BURDEN OF PROOF IN A CONSTRUCTIVE FRAUD ACTION DID NOT APPLY, FIDUCIARIES WERE NOT PARTIES TO THE RELEVANT DOCUMENTS AND DID NOT STAND TO BENEFIT FROM THE PROVISIONS OF THE DOCUMENTS)/ATTORNEYS (FIDUCIARY EXCEPTION TO THE USUAL BURDEN OF PROOF IN A CONSTRUCTIVE FRAUD ACTION DID NOT APPLY, ATTORNEYS WHO DRAFTED THE RELEVANT DOCUMENTS WERE NOT PARTIES AND DID NOT STAND TO BENEFIT FROM THE PROVISIONS OF THE DOCUMENTS)/TRUSTS AND ESTATES  (FIDUCIARY EXCEPTION TO THE USUAL BURDEN OF PROOF IN A CONSTRUCTIVE FRAUD ACTION DID NOT APPLY, ATTORNEYS WHO DRAFTED RELEASES OF POWERS OF APPOINTMENT WERE NOT PARTIES TO THE RELEASES AND DID NOT STAND TO BENEFIT FROM THE RELEASES)/POWERS OF APPOINTMENT  (FIDUCIARY EXCEPTION TO THE USUAL BURDEN OF PROOF IN A CONSTRUCTIVE FRAUD ACTION DID NOT APPLY, ATTORNEYS WHO DRAFTED RELEASES OF POWERS OF APPOINTMENT WERE NOT PARTIES TO THE RELEASES AND DID NOT STAND TO BENEFIT FROM THE RELEASES)

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DEFENDANT’S DEATH PRIOR TO PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT DIVESTED THE COURT OF JURISDICTION, COURT SHOULD NOT HAVE DECIDED MOTION AND ORDER APPEALED FROM WAS A NULLITY.

In this foreclosure action, the Second Department determined plaintiff bank's motion for summary judgment should not have been entertained because defendant had died before the motion was brought. The order appealed from was therefore a nullity:

Here, the deceased defendant died before the plaintiff's motion was made and before the order appealed from was issued. The attorney who had represented the deceased defendant prior to his death purportedly took this appeal on behalf of, among others, the deceased defendant. However, since a substitution of parties had not been effected prior to the filing of the notice of appeal, counsel lacked the authority to act for the deceased defendant, and the purported appeal taken on behalf of the deceased defendant must be dismissed … . Furthermore, since no substitution was made prior to the entry of the order appealed from, the order appealed from is a nullity to the extent that it pertains to the deceased defendant, and we vacate so much of the order as granted that branch of the plaintiff's motion which was for summary judgment on the complaint insofar as asserted against the deceased defendant … .

Similarly, in this case, since a proper substitution had not been made, the Supreme Court should not have determined the merits of the plaintiff's motion, even to the extent that the plaintiff sought relief against the other defendants … . Aurora Bank FSB v Albright, 2016 NY Slip Op 02307, 2nd Dept 3-30-16

CIVIL PROCEDURE (DEFENDANT'S DEATH PRIOR TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT DIVESTED THE COURT OF JURISDICTION, COURT SHOULD NOT HAVE DECIDED MOTION AND ORDER APPEALED FROM WAS A NULLITY)/JURISDICTION (DEATH, DEFENDANT'S DEATH PRIOR TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT DIVESTED THE COURT OF JURISDICTION, COURT SHOULD NOT HAVE DECIDED MOTION AND ORDER APPEALED FROM WAS A NULLITY)/TRUSTS AND ESTATES (DEFENDANT'S DEATH PRIOR TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT DIVESTED THE COURT OF JURISDICTION, COURT SHOULD NOT HAVE DECIDED MOTION AND ORDER APPEALED FROM WAS A NULLITY)/APPEALS (DEATH, DEFENDANT'S DEATH PRIOR TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT DIVESTED THE COURT OF JURISDICTION, COURT SHOULD NOT HAVE DECIDED MOTION AND ORDER APPEALED FROM WAS A NULLITY)

LETTERS TESTAMENTARY PROPERLY REVOKED WITHOUT A HEARING.

The Second Department determined Surrogate's Court properly revoked letters testamentary without a hearing based upon undisputed proof the administrators were in conflict with each other, improvidently managed the property and failed to abide by the terms of a so-ordered stipulation:

The removal of a fiduciary pursuant to SCPA 711 and 719 is equivalent to a judicial nullification of the testator's choice and may only be decreed when the grounds set forth in the relevant statutes have been clearly established … . The Surrogate may remove a fiduciary without a hearing only where the misconduct is established by undisputed facts or concessions, where the fiduciary's in-court conduct causes such facts to be within the court's knowledge, or where facts warranting an amendment of letters are presented to the court during a related evidentiary proceeding … . Thus, revoking a fiduciary's letters without a hearing pursuant to SCPA 719 will constitute an abuse of discretion where the facts are disputed, where conflicting inferences may be drawn therefrom, or where there are claimed mitigating facts that, if established, would render summary removal an inappropriate remedy … . Matter of Kaufman, 2016 NY Slip Op 01849, 2nd Dept 3-16-16

TRUSTS AND ESTATES (LETTERS TESTAMENTARY PROPERLY REVOKED WITHOUT A HEARING)/LETTERS TESTAMENTARY (PROPERLY REVOKED WITHOUT A HEARING)

PETITION SEEKING DISCOVERY BASED UPON THE ALLEGATION RESPONDENT HELD ASSETS OF THE ESTATE PROPERLY DENIED, PETITIONERS DID NOT MEET THEIR INITIAL BURDEN.

After carefully considering all the allegations (not summarized here), the Third Department determined the petitioners (children of the decedent) did not meet their burden of showing respondent (another child of the decedent who had lived with decedent) held any property which was an asset of the estate. The petition seeking discovery pursuant to Surrogate's Court Procedure Act (SCPA) 2103 was therefore properly denied:

SCPA 2103 establishes a discovery procedure by which a fiduciary can identify and recover estate assets held by a third party … . The fiduciary bears the burden to prove that property held by a respondent is an estate asset; only when that obligation has been satisfied does the burden shift to the respondent to prove the proper disposition of the disputed property. We agree with Surrogate's Court that petitioners did not satisfy this initial burden and failed to establish grounds for further inquiry. Dwyer v Valachovic, 2016 NY Slip Op 01542, 3rd Dept 3-3-16

TRUSTS AND ESTATES (PETITIONERS DID NOT DEMONSTRATE RESPONDENT HELD ASSETS OF THE ESTATE, PETITION FOR DISCOVERY PURSUANT TO SCPA 2103 PROPERLY DENIED)/SURROGATE'S COURT PROCEDURE ACT (PETITIONERS DID NOT DEMONSTRATE RESPONDENT HELD ASSETS OF THE ESTATE, PETITION FOR DISCOVERY PURSUANT TO SCPA 2103 PROPERLY DENIED)

QUESTION OF FACT RAISED WHETHER DECEDENT REVOKED A LOST WILL.

The Second Department determined summary judgment should not have been granted in favor of objectants to the probate of a will. The original will could not be found, but copies were in a folder decedent told his home aide about. There was, therefore, a question of fact raised about whether the will had been revoked:

 

When a will previously executed and in the testator's possession cannot be found after the death of the testator, a presumption arises that the will was revoked by the testator … . This legal presumption may be overcome, and the lost will admitted to probate, if the will's proponent establishes that the will was not revoked by the testator during his or her lifetime (see SCPA 1407[1]…). * * *

… [E]vidence that, shortly before his death, the decedent showed the blue binder to the home health aide and stated that it contained his will and that it was kept in a certain location, which the decedent was thereafter unable to access due to his declining health, and where several copies of the will were later found after his death, was sufficient to raise an issue of fact regarding the presumption of revocation of his will, thereby precluding an award of summary judgment to the objectants on the issue of revocation … . Matter of Marotta, 2016 NY Slip Op 01491, 2nd Dept 3-2-16

TRUSTS AND ESTATES (QUESTION OF FACT RAISED WHETHER LOST WILL WAS REVOKED)/WILLS (QUESTION OF FACT RAISED WHETHER LOST WILL WAS REVOKED)

PROBATE PETITION PROPERLY DISMISSED; WITNESSES DID NOT READ ATTESTATION CLAUSE, EVIDENCE SOME WILL PAGES MISSING AT TIME OF EXECUTION.

The Second Department determined the probate petition was properly dismissed. The presumption the will was properly executed was rebutted because the witnesses did not read the attestation clause before signing and there was evidence some of the pages of the will were missing at the time it was executed:

 

” A valid attestation clause raises a presumption of a will’s validity, [but] it is nonetheless incumbent upon [the] Surrogate’s Court to examine all of the circumstances surrounding the execution of the document in order to ascertain its validity'” … . In conducting this examination, ” the testimony of the attesting witnesses is entitled to great weight'” … .

Here, the attesting witnesses both testified at their depositions that they did not read the attestation clause. Under these circumstances, the attestation clause cannot carry any presumption that the will was properly executed … . The moving objectants met their prima facie burden of establishing that the purported will was not properly executed by submitting evidence that not all of the pages of the document alleged to be the decedent’s will were present at the time of the purported execution … . In opposition, the petitioner failed to raise a triable issue of fact … . Contrary to the petitioner’s contention, the evidence regarding the testamentary intent of the decedent does not raise a triable issue of fact because, with respect to due execution, ” courts do not consider the intention of the testator, but that of the legislature,'” such that the statutory requirements of due execution are determinative … . Matter of Costello, 2016 NY Slip Op 01322, 2nd Dept 2-24-16

TRUSTS AND ESTATES (WITNESSES DID NOT READ ATTESTATION CLAUSE, EVIDENCE PAGES OF WILL MISSING AT EXECUTION)/PROBATE (PROBATE PETITION PROPERLY DISMISSED, WITNESSES DID NOT READ ATTESTATION CLAUSE, PAGES OF WILL MAY HAVE BEEN MISSING AT EXECUTION)/ATTESTAION CLAUSE (WITNESS DID NOT READ, PRESUMPTION OF PROPER EXECUTION REBUTTED)/EXECUTION OF WILL (WITNESSES DID NOT READ ATTESTATION CLAUSE, EVIDENCE PAGES OF WILL MISSING AT EXECUTION)

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TRUST WHICH ALLOWED PETITIONER’S CHILDREN TO DISTRIBUTE PRINCIPAL TO PETITIONER RENDERED PETITIONER INELIGIBLE FOR MEDICAID, DESPITE CHILDREN’S REFUSAL TO MAKE A DISTRIBUTION.

The Fourth Department confirmed the Department of Health’s finding that a trust which allowed petitioner’s children to distribute the principal to her rendered petitioner ineligible for Medicaid benefits, despite the children’s refusal to make a distribution:

 

… [W]e conclude that the agency’s determination, which is based on its conclusion that the principal of a trust of which petitioner is a beneficiary is an “available resource,” is supported by substantial evidence and is not affected by an error of law. The trust at issue grants petitioner’s children, as cotrustees, “the authority to distribute so much of the principal to [petitioner that they,] in their sole discretion, deem advisable to provide for [petitioner’s] health, maintenance and welfare.” Because the principal of the trust may, in the discretion of petitioner’s children, be paid for petitioner’s benefit, the agency did not err in concluding that the principal of the trust is an available resource for purposes of petitioner’s Medicaid eligibility determination (see 18 NYCRR 360-4.5 [b] [1] [ii]…), despite the fact that her children refuse to exercise their discretion to make such payments of principal. Matter of Flannery v Zucker, 2016 NY Slip Op 01075, 4th Dept 2-11-16

 

MEDICAID (TRUST WHICH ALLOWED CHILDREN TO MAKE DISTRIBUTIONS TO PETITIONER RENDERED HER INELIGIBLE FOR MEDICAID, DESPITE CHILDREN’S REFUSAL TO MAKE SUCH A DISTRIBUTION)/TRUSTS AND ESTATES (MEDICAID, TRUST WHICH ALLOWED CHILDREN TO MAKE DISTRIBUTIONS TO PETITIONER RENDERED HER INELIGIBLE FOR MEDICAID, DESPITE CHILDREN’S REFUSAL TO MAKE SUCH A DISTRIBUTION)

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