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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 There was, therefore, a question of fact raised about whether the will had been revoked: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and in the testator's possession cannot be found after the death of the testator, a presumption arises that the will was revoked by the testator … .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TRUSTS AND ESTATES (QUESTION OF FACT RAISED WHETHER LOST WILL WAS REVOKED)/WILLS (QUESTION OF FACT RAISED WHETHER LOST WILL WAS REVOKED)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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COMPLAINT NAMING DECEDENT, RATHER THAN DECEDENT’S REPRESENTATIVE, AS A DEFENDANT WAS A NULLITY; THE DEFECT COULD NOT BE REMEDIED BY AMENDING THE COMPLAINT.

The Second Department determined plaintiff’s action should have been dismissed as a nullity. The defendant in this car-accident action had died before the complaint was filed. Therefore the complaint was a nullity. The defect could not be remedied by amending the complaint to name the decedent’s estate:

In this action to recover damages for alleged injuries arising from a vehicular accident, the plaintiff did not commence this action against the operator of the offending vehicle until several months after the operator died. Since “[a] party may not commence a legal action or proceeding against a dead person” … , the action was a nullity from its inception, and the plaintiff was instead required to commence an action against the personal representative of the decedent’s estate … . Moreover, the plaintiff’s attempt to amend the caption of the void complaint to designate the decedent’s estate as the defendant was invalid … . The plaintiff never properly commenced an action against the decedent’s personal representative, and the time within which to do so had expired prior to the defendant’s motion for summary judgment. Krysa v Estate of Qyra, 2016 NY Slip Op 00940, 2nd Dept 2-10-16

CIVIL PROCEDURE (COMPLAINT NAMING DECEDENT RATHER THAN DECEDENT’S REPRESENTATIVE AS A DEFENDANT WAS A NULLITY AND THE DEFECT COULD NOT BE REMEDIED BY AMENDING THE COMPLAINT)/TRUSTS AND ESTATES (COMPLAINT NAMING DECEDENT RATHER THAN DECEDENT’S REPRESENTATIVE AS A DEFENDANT WAS A NULLITY AND THE DEFECT COULD NOT BE REMEDIED BY AMENDING THE COMPLAINT)

DEVISE OF REAL PROPERTY HAD NOT ADEEMED, DESPITE DEED PURPORTING TO TRANSFER PROPERTY PRIOR TO DEATH.

The will bequeathed real property to decedent’s two daughters, Watson and Fitzsimmons, with a life estate to Watson. Before decedent’s death Watson used a power of attorney to deed the property to herself. The Second Department determined decedent retained equitable title to the property at death. The deed was determined to be voidable, not void ab initio, and was not declared void until after death. Fitzsimmons argued that the devise of the property adeemed because it was not in decedent’s estate at death. Therefore, Fitzsimmons argued, the life estate awarded Watson in the will was cut off. Affirming Surrogate’s Court, the Second Department held the devise of the property had not adeemed:

 

The doctrine of ademption provides that “[u]nless the property devised or the thing bequeathed was found in the estate of the [decedent] at the time of [his or] her death, the will was necessarily inoperative as to that provision” … . Fitzsimmons asserted that because the deed to Watson was not void ab initio and was not declared void until after the decedent’s death, the decedent did not own the property at the time of her death, having deeded it to Watson. As such, Fitzsimmons contended that the devise of the property in the will adeemed, and that the property should pass through the residuary estate, which left 50% each to Fitzsimmons and Watson, thereby cutting off Watson’s life estate.

Under the particular circumstances of this case, the Surrogate’s Court properly held that the specific devise of property should not be determined to have adeemed, although it was not owned by the decedent at the time of her death. The deed by which the property was transferred to Watson was voidable, and thus, the decedent retained equitable title to the property, which title reverted to her estate when Fitzsimmons successfully asserted the estate’s claims to it … . Matter of Hill, 2016 NY Slip Op 00499, 2nd Dept 1-27-16

 

TRUSTS AND ESTATES (DEVISE OF REAL PROPERTY HAD NOT ADEEMED)/ADEMPTION (DEVISE OF REAL PROPERTY HAD NOT ADEEMED DESPITE DEED PURPORTING TO TRANSFER PROPERTY PRIOR TO DEATH)/DEEDS (VOIDABLE DEED, DECEDENT RETAINED EQUITABLE TITLE AT DEATH)

STATUTORY DOCTRINE OF EQUITABLE DEVIATION ALLOWED CHURCHES TO DEVIATE FROM THE TERMS OF CHARITABLE TRUSTS TO SEEK A LARGER RETURN ON INVESTMENTS.

The Third Department, reversing Surrogate’s Court, determined petitioners, three churches which were beneficiaries of charitable trusts, were entitled to equitable deviation from the terms of the trusts. The trusts required the assets be held in insured bank accounts. Because bank accounts have generated low interest for many years, the churches sought to deviate from the terms of the trusts and make investments in accordance with the Prudent Investor Act (EPTL 11-2.3):

 

EPTL 8-1.1 (c) embodies “New York’s statutory articulation of cy pres and equitable deviation” … . Equitable deviation involves altering or amending an administrative provision, whereas cy pres effects a substantive change … . Thus, equitable deviation may be appropriate where cy pres is not because an administrative change can be made without altering the purpose of the trust or changing its disposition provisions … . Some cases addressing common-law equitable deviation required an unforeseen change in circumstances … , whereas the statutory provision applicable to charitable trusts does not require the change to be unforeseen … . The statute provides that “whenever it appears to [Surrogate’s Court] that circumstances have so changed since the execution of an instrument making a disposition for religious . . . purposes as to render impracticable or impossible a literal compliance with the terms of such disposition, the court may, on application . . . make an order or decree directing that such disposition be administered and applied in such a manner as in the judgment of the court will most effectively accomplish its general purposes, free from any specific restriction, limitation or direction contained therein” … . Matter of Chamberlin, 2016 NY Slip Op 00087, 3rd Dept 1-7-16

 

TRUSTS AND ESTATES (EQUITABLE DEVIATION ALLOWED CHURCHES TO SEEK A LARGER RETURN ON INVESTMENTS FROM CHARITABLE TRUSTS)/CHARITABLE TRUSTS (EQUITABLE DEVIATION ALLOWED CHURCHES TO SEEK A LARGER RETURN ON INVESTMENTS)/EQUITABLE DEVIATION (DOCTRINE OF EQUITABLE DEVIATION ALLOWED CHURCHES TO SEEK A LARGER RETURN ON INVESTMENTS)

REMAINDER INTERESTS WHICH CAN ONLY BE DIVESTED BY A POWER OF APPOINTMENT ARE VESTED REMAINDER INTERESTS.

The Second Department determined the five individuals who were to take remainder interests in the event a power of appointment was not exercised had vested remainder interests:

In Article Third of the will, the testator created a trust for the benefit of Sydelle [his wife] during her lifetime. Upon the death of Sydelle, the remainder was to be distributed to or for the benefit of such one or more persons within a class composed of the testator’s then living issue or Sydelle’s living issue, “in such estates, interests and proportions as [Sydelle] may appoint by specific reference to this power of appointment in her last will and testament, admitted to probate.” The will provided that if Sydelle failed to exercise or did not fully or effectually exercise her power of appointment, all property not effectually appointed, was to be paid and distributed to five other named individuals. * * *

“It is a well-established rule, both of the common law and by statute, in this State that estates in remainder which are limited to take effect upon default in the exercise of a power of appointment are not prevented from vesting by the existence of the power, but take effect in the same manner as if no power existed, subject, however, to be divested by an exercise of the power” … . Where the power of appointment has not been exercised and cannot be until the death of the person with the power of appointment, it may be eliminated from consideration and the next limitation considered … . Thus, the five individuals named in Article Third … have a vested remainder interest which can be divested if Sydelle exercises her power of appointment by will … . Matter of Levitan, 2015 NY Slip Op 08838, 2nd Dept 12-2-15

TRUSTS AND ESTATES (WILL CONSTRUCTION, EFFECT OF POWER OF APPOINTMENT ON REMAINDER INTERESTS)/POWER OF APPOINTMENT (WILL CONSTRUCTION, EFFECT OF POWER OF APPOINTMENT ON REMAINDER INTERESTS)/WILL CONSTRUCTION (EFFECT OF POWER OF APPOINTMENT ON REMAINDER INTERESTS)/REMAINDER INTERESTS (WILL CONSTRUCTION, EFFECT OF POWER OF APPOINTMENT ON REMAINDER INTERESTS)

Trustee Was Not Negligent In Its Management of Three Trusts; Surrogate’s Court’s Findings Reversed

Reversing Surrogate’s Court, the Fourth Department determined the trustee of three trusts initially funded by Kodak stock was not negligent in its management of the trusts. The Fourth Department analyzed each trust using the relevant investment standards:

We conclude that the Surrogate erred in sustaining the objections to the three accounts because objectants failed to sustain their burden of proving that petitioner failed to diversify the trusts prudently within a reasonable time, and also failed to establish a reasonable date from which a surcharge could be calculated. As we explained in Knox (98 AD3d at 308-309), petitioner was subject to three separate standards of care as trustee: “[f]rom [1966] until 1970, the standard was the common-law rule, which provided that the trustee is bound to employ such diligence and such prudence in the care and management, as in general, prudent [persons] of discretion and intelligence in such matters, employ in their own like affairs’ . . . From 1970 to 1995, the standard of care was the prudent person rule established in EPTL 11-2.2 (a) (1), which provided that [a] fiduciary holding funds for investment may invest the same in such securities as would be acquired by prudent [persons] of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital’ . . . Effective, January 1, 1995, the Prudent Investor Act (EPTL 11-2.3 [L 1994, ch 609, § 1]) created a new standard of care by providing that [a] trustee shall exercise reasonable care, skill and caution to make and implement investment and management decisions as a prudent investor would for the entire portfolio, taking into account the purposes and terms and provisions of the governing instrument’ (EPTL 11-2.3 [b] [2]). The statute lists various elements of the prudent investor standard, including: pursuing an overall investment strategy; considering numerous factors pertaining to the overall portfolio including, e.g., general economic conditions; and diversifying assets (see EPTL 11-2.3 [b] [3] [A]-[C]).” Notably, the “Prudent Investor Act requires a trustee to diversify assets unless the trustee reasonably determines that it is in the interests of the beneficiaries not to diversify’ ” (Janes, 90 NY2d at 49 n, quoting EPTL 11-2.3 [b] [3] [C]; see Knox, 98 AD3d at 310). Matter of Jp Morgan Chase Bank, N.A., 2015 NY Slip Op 08533, 4th Dept 11-20-15

 

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Constructive Trust Properly Imposed on Real Property, Criteria Explained

The Second Department determined the defendant (Chen) was entitled to impose a constructive trust on real property for which she contributed money. The court explained the criteria:

“Generally, a constructive trust may be imposed when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest'” … . “The elements of a constructive trust are (1) a fiduciary or confidential relationship; (2) an express or implied promise; (3) a transfer in reliance on the promise; and (4) unjust enrichment” … . While these factors are useful in many cases, the constructive trust doctrine is not rigidly limited … . Thus, although the elements of a constructive trust must be proved by clear and convincing evidence …, “[t]he constructive trust doctrine is given broad scope to respond to all human implications of a transaction in order to give expression to the conscience of equity and to satisfy the demands of justice” … .

Here, the Supreme Court properly awarded judgment in favor of the defendant Al Ming Chen on her counterclaim to impose a constructive trust on the subject real property. Contrary to the plaintiff’s contention, Chen offered evidence satisfying the elements generally needed for the imposition of a constructive trust. The plaintiff’s contention that Chen never had any interest in the subject property, and therefore is not entitled to the imposition of a constructive trust, is without merit. Chen showed that she contributed money for the purchase of the subject property and for paying down the mortgage in reliance on an implied promise by the plaintiff that she shared an interest in the property … . Moreover, Chen demonstrated that a constructive trust is necessary in this case to satisfy the demands of justice … . Liu v Chen, 2015 NY Slip Op 08152, 2nd Dept 11-12-15

 

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Statute of Limitations for Breach of Fiduciary Duty Tolled Until Fiduciary’s Roles Terminated

In an action against a fiduciary stemming from the distribution of an estate, Supreme Court determined the six-year statute of limitations applied to the breach of fiduciary duty cause of action and precluded any evidence from prior to 2007.  The Third Department agreed that the six-year statute was the correct one, but held that the statute never started running because the fiduciary’s roles were never terminated. Therefore pre-2007 evidence was not precluded:

Although “New York law does not provide a single statute of limitations for breach of fiduciary duty claims [and] the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks” …, the parties do not dispute that a six-year period applies to these two remaining causes of action. However, the statute of limitations for a claim alleging a breach of fiduciary duty is tolled until there has been an open repudiation by the fiduciary or the relationship has otherwise been clearly terminated … .

There is nothing in this record indicating that respondents’ relevant fiduciary roles have terminated. Although many of the actions about which petitioners complain were done openly, petitioners also allege that they were repeatedly assured that such actions were ultimately in their best interests. The amended petition alleges that respondents have not to date repudiated their positions as fiduciaries. That allegation is not denied in this pre-answer motion, which was supported only by an attorney’s affirmation and memorandum of law. Matter of Therm, Inc., 2015 NY Slip Op 07732, 3rd Dept 10-22-15

 

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