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Filing of Article 78 Petition Itself Constituted a Demand that Respondent Perform Its Duty, the Triggering Event for the Four-Month Statute of Limitations in a Mandamus to Compel Proceeding/Supreme Court and Surrogate’s Court Have Concurrent Jurisdiction Over the Administration of an Estate

The Second Department noted that Supreme Court and Surrogate’s Court have concurrent jurisdiction over the administration of a decedent’s estate. The petitioner commenced the Article 78 proceeding to compel the NYC Employees’ Retirement System (NYCERS) to accept a designation of a beneficiary form.  Surrogate’s Court had declined to exercise jurisdiction over the proceeding. The Second Department explained that the filing of the petition itself triggered the four-month statute of limitations for mandamus, so the proceeding was timely:

In a proceeding in the nature of mandamus to compel, the four-month statute of limitations begins to run “after the respondent’s refusal, upon the demand of the petitioner . . . to perform its duty” (CPLR 217[1]…). The filing of a CPLR article 78 petition can itself be construed as a demand … . Here, the petitioner made her demand that NYCERS perform its duty to accept her late husband’s fully completed and notarized designation of beneficiary form by filing the petition in this proceeding … . Accordingly, the petition is not time-barred … . Matter of Gopaul v NYC Employees’ Retirement Sys, 2014 NY Slip Op 0802-0, 2nd Dept 11-19-14

 

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Plaintiff Had Made Out a Prima Facie Case of Undue Influence—Trial Judge Erred by Making Credibility Determinations and Granting a Judgment In Favor of the Defendant As a Matter of Law (CPLR 4401)

In reversing Supreme Court, the Second Department determined the motion for a judgment as a matter of law pursuant to CPLR 4401 should not have been granted.  The plaintiff sought to set aside a conveyance by deed on the ground of undue influence. The Second Department held that plaintiff had made out a prima facie case and sent the matter back for trial in front of a different judge:

” A trial court’s grant of a CPLR 4401 motion for judgment as a matter of law is appropriate where the trial court finds that, upon the evidence presented, there is no rational process by which the fact trier could base a finding in favor of the nonmoving party'” … . ” In considering the motion, the trial court must afford the party opposing the motion every inference which may be properly drawn from the facts presented, and the facts must be considered in a light most favorable to the nonmovant'” … .

The burden of proving undue influence generally rests with the party asserting its existence … . “However, where there is a confidential relationship between the beneficiary and the grantor, [a]n inference of undue influence’ arises which requires the beneficiary to come forward with an explanation of the circumstances of the transaction” … . “In the absence of an explanation, the beneficiary has the burden of proving by clear and convincing evidence that the transaction was fair and free from undue influence” … .

Here, in granting the defendant’s motion pursuant to CPLR 4401, the Supreme Court improperly resolved issues of the credibility of the witnesses against the plaintiff … . Viewing the evidence in a light most favorable to the plaintiff, and resolving all issues of credibility in the plaintiff’s favor, we find that the plaintiff established, prima facie, that a confidential relationship existed between the decedent and the defendant, requiring the defendant to come forth with an explanation of the circumstances of the transaction. Palladino v McCormick, 2014, NY Slip Op 07992, 2nd Dept 11-19-14

 

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Relationship Between the “Open Repudiation [of Fiduciary Obligations] Rule” and the Laches Defense Explained/Allegations that Investments Made by the Fiduciary Underperformed Does Not State a Cause of Action for Breach of the Fiduciary Duty

In reversing Surrogate’s Court’s dismissal of objections to the fiduciary’s final accounting based on the laches defense, the Fourth Department explained the “open repudiation rule” and its relationship to laches.  To take advantage of the laches defense, the fiduciary must have openly repudiated his or her obligation or there must have been a judicial settlement of the fiduciary’s account, niether of which took place here.  The Fourth Department reached the same result as did Surrogate’s Court by concluding, pursuant to CPLR 3211(a)(7), that the numerous specific objections failed to state any cause of action against the fiduciary.  With respect to the “open repudiation rule” and the “underperforming investments” allegations, the court wrote:

… [T]he open repudiation rule applies to the defense of laches … . As the Court of Appeals stated in Barabash, “[a] fiduciary is not entitled to rely upon the laches of his beneficiary as a defense, unless he repudiates the relation to the knowledge of the beneficiary” … . Moreover, the open repudiation rule “requires proof of a repudiation by the fiduciary which is clear and made known to the beneficiaries” … . * * * Inasmuch as petitioner’s repudiation of its role of fiduciary was a prerequisite to its assertion of the defense of laches, and because no such repudiation occurred, we conclude that the Surrogate erred in permitting petitioner to assert that defense and in dismissing the objections on the ground that the objections were barred thereby. * * *

The elements of a cause of action for breach of fiduciary duty are ” the existence of a fiduciary duty, misconduct by the [fiduciary] and damages that were directly caused by the [fiduciary’s] misconduct’ ” … . * * *

We reject objectants’ contention that they stated a cause of action for breach of fiduciary duty by filing an objection to petitioner’s refusal to consider investment in nonproprietary funds. Objectants correctly concede that the Prudent Investor Act permits petitioner to invest trust assets in proprietary funds (see EPTL 11-2.3 [d]). The Prudent Investor Act also requires a trustee such as petitioner with “special investment skills” to “exercise such diligence in investing and managing assets as would customarily be exercised by prudent investors of discretion and intelligence having special investment skills” (EPTL 11-2.3 [b] [6]). Even under this standard, however, ” it is not sufficient that hindsight might suggest that another course would have been more beneficial; nor does a mere error of investment judgment mandate a surcharge’ ” … . Thus, it is well settled that ” a fiduciary’s conduct is not judged strictly by the success or failure of the investment . . . In short, the test is prudence, not performance, and therefore evidence of losses following the investment decision does not, by itself, establish imprudence’ ” … . Here, objectants merely alleged that the proprietary funds were underperforming, which is insufficient to state a cause of action for breach of fiduciary duty … . Matter of JPMorgan Chase Bank NA, 2014 NY Slip Op 07799, 4th Dept 11-14-14

 

Summary Judgment Admitting Will to Probate Appropriate Where Objections to the Will (“Testamentary Capacity” and “Undue Influence”) Not Supported

The Third Department determined summary judgment admitting the will to probate was appropriately granted where the “testamentary capacity” and “undue influence” objections were not supported by evidence:

“Whether to dismiss a party’s objections and admit the challenged will to probate is a matter committed to the sound discretion of Surrogate’s Court and, absent an abuse of that discretion, the court’s decision will not be disturbed” … . While rare, summary judgment in a contested probate proceeding is appropriate where a petitioner establishes a prima facie case for probate and the objectant does not raise any factual issues regarding testamentary capacity, execution of the will, undue influence or fraud … . Upon our review of the record, we find that respondent has raised no such issues and we, therefore, conclude that Surrogate’s Court properly awarded summary judgment to petitioner.

As to testamentary capacity, petitioner bore the initial burden of establishing that decedent understood the nature and consequences of making the will, the nature and extent of her property, and the natural objects of her bounty … . Notably, it was only necessary to demonstrate that decedent had “a general, rather than a precise, knowledge of the assets in . . . her estate” … .  * * *

…[T]he fact that a decedent was subject to undue influence is established when he or she “‘was actually constrained to act against [his or her] own free will and desire by identifying the motive, opportunity and acts allegedly constituting the influence, as well as when and where such acts occurred'” … . Here, notwithstanding the confidential relationship between decedent and petitioner …, the record is bereft of any direct or circumstantial evidence indicating that petitioner exercised undue influence over decedent … . “On the contrary, [the evidence] indicate[s] that the will was the product of the free and unfettered act of [decedent]” … . Matter of Vosilla, 2014 NY Slip Op 07417, 3rd Dept 10-30-14

 

Jury Instruction Re: Presumption Will Was Duly Executed Proper Even In Absence of Self-Attesting Affidavits by the Witnesses

The Third Department determined the absence of self-attesting witness affidavits did not preclude instructing the jury that it could presume the will was duly executed if it found that the witnesses signed their names after the attestation clause:

…”[I]f the attestation clause is full and the signatures genuine and the circumstances corroborative of due execution, and no evidence disproving a compliance in any particular, the presumption may be lawfully indulged that all the provisions of the statute were complied with, although the witnesses are unable to recollect the execution of what took place at the time” … . The attestation clause here states that decedent signed the will in the presence of the attesting witness, declared the document to be her last will and testament, and the witnesses signed the clause at decedent’s request and in her presence, in accord with the statutory criteria (see EPTL 3-2.1). Moreover, both attesting witnesses confirmed that they were present during the ceremony, that they signed the attestation clause and that decedent appeared of sound mind. One witness testified that he observed decedent sign the will, while the other witness, who was a notary public, testified that she would not have served as a witness unless decedent signed the will in her presence. In this context, Surrogate’s Court properly charged the jury regarding the presumption of due execution of the will … . Matter of Shapiro, 2014 NY Slip Op 07395, 3rd Dept 10-30-14

 

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Surrogate’s Court Abused Its Discretion In Awarding Attorney’s Fees Greater than Those Called for by the Retainer Agreement—Evidence in Support of “Exceptional Circumstances” Justifying the Higher Fees Not Sufficient—Retainer Agreement Construed in Light Most Favorable to the Client

The Third Department determined Surrogate’s Court erred in awarding attorney’s fees in excess of those agreed to in the retainer agreement between the executors of an estate and the attorney hired to handle the estate.  Although the retainer agreement allowed for increased fees for “extenuating circumstances,” the Third Department found the proof of consultation and approval re: increased fees, required by the retainer agreement, lacking.  The court noted that a retainer agreement is construed in the light most favorable to the client:

Surrogate’s Court abused its discretion in fixing [the estate attorney’s] fee at $50,000. Surrogate’s Court is vested with broad discretion to fix the reasonable compensation of an attorney who renders legal services to a fiduciary of an estate, subject to modification only where that discretion has been abused (see SCPA 2110…). While the court is not bound by a retainer agreement when determining whether an unreasonable fee must be restricted …, a court “cannot award legal fees in excess of what has been agreed to by the parties in a retainer agreement” … . The attorney seeking fees bears the burden of establishing the reasonable value of the services rendered … . * * *

“The general rule that ‘equivocal contracts will be construed against the drafters’ is subject to particularly rigorous enforcement in the context of attorney-client retainer agreements,” such that we must construe the agreement in the light most favorable to the clients … . Matter of Benware, 2014 NY Slip Op 07218, 3rd Dept 10-23-14

 

Fiduciary’s Conflict of Interest Renders Transactions Voidable

The First Department noted the effect of a fiduciary’s conflict of interest upon transactions entered into by the fiduciary:

When a fiduciary has a conflict of interest in entering a transaction and does not disclose that conflict to his/her principal, the transaction is “voidable at the option of” the principal … . Moreover, “an agent cannot bind his principal . . . where he is known to be acting for himself, or to have an adverse interest” … .  Genger v Genger, 2014 NY Slip Op 06248, 1st Dept 9-23-14

 

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Husband, Criminally Responsible for the Death of His Mother-in-Law, Could Not Inherit the Mother-in-Law’s Estate Indirectly After the Death of His Wife

The Second Department, in a full-fledged opinion by Justice Hall, determined the husband, Brandon, who was criminally responsible for the death his mother-in-law, could not inherit the mother-in-law’s estate indirectly after the death of his wife, Deanna:

The principle that a wrongdoer may not profit from his or her wrongdoing is deeply rooted in this State’s common law. In 1889, the Court of Appeals decided the seminal case of Riggs v Palmer (115 NY 506) . In Riggs, a grandson, who had intentionally killed his grandfather in order to ensure his inheritance, was prevented from inheriting under the grandfather’s will. In reaching this determination, the Court of Appeals held that, “[n]o one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime” (id. at 511). In short, the Riggs rule “prevents wrongdoers from acquiring a property interest, or otherwise profiting from their own wrongdoing” … . * * *

The issue here is whether the Riggs doctrine may be extended to prevent a wrongdoer from indirectly profiting from his or her own wrongdoing. More specifically, we are asked to determine whether Brandon may inherit assets of the decedent’s estate indirectly through Deanna’s estate. While it is clear that Brandon would not be able to inherit from the decedent’s estate directly, the issue of whether he may do so indirectly through Deanna’s estate is less settled. Indeed, this is an issue of first impression, as there is no appellate precedent from New York addressing whether the Riggs doctrine applies where a killer seeks to inherit assets from his or her victim indirectly through the estate of a person not implicated in the unlawful killing. * * *

Here … there is a clear causal link between the wrongdoing and the benefits sought … . But for Brandon’s killing of the decedent, the estate of Deanna would not likely include any assets from the decedent’s estate. Furthermore, since only a relatively short period of time elapsed between the decedent’s death and the death of Deanna, it is clear that Deanna’s estate would include assets traceable to the decedent. Indeed, according to [the] petition for letters of administration, Deanna’s estate consists only of funds Deanna received as beneficiary of the decedent’s retirement plan, and the expected inheritance from the decedent. Significantly, the decedent’s estate has not yet been distributed to Deanna’s estate, and no commingling of any funds between the two estates has occurred.

Under these circumstances, the Surrogate’s Court appropriately exercised its equitable powers (see SCPA 201[2]) in extending the Riggs doctrine to prevent Brandon from inheriting any portion of the decedent’s estate through the estate of Deanna … . Matter of Dianne Edwards, 2014 NY Slip Op 05873, 2nd Dept 8-20-14

 

No Contest Clause Was Not Triggered by Offering Will for Probate or Questioning Actions of Named Executor(s)

The Third Department, in a full-fledged opinion by Justice Peters, over a dissent, determined that a no contest clause in a will was not triggered by offering the will for probate and was not triggered by questioning the actions of the named executors.  The beneficiary of a 2006 will, who had been excluded from the 2011 will, sought to probate the 2006 will.  The petitioners then sought probate of the 2011 will when the executors failed to do so. The beneficiary of the 2006 will argued that the no contest clause in the 2011 will had thereby been triggered:

While enforceable, no contest clauses are disfavored and must be strictly construed … . The no contest provision at issue provides for revocation of a beneficiary’s interest if the beneficiary “contest[s] the probate or validity of [the] Will or any provision thereof, or . . . institute[s] . . . any proceeding to . . . prevent any provision [of the Will] from being carried out in accordance with its terms.” Here, petitioners did not contest the validity of the will or any of its provisions by seeking to admit the will to probate … . Rather, given that [the beneficiary of the 2006 will who had been excluded as a beneficiary from the 2011 will] had already offered the 2006 will for probate nearly two months earlier, they reasonably undertook to probate the 2011 will themselves after the nominated executor and successor executor thereunder failed to do so.

To the extent that petitioners sought letters of administration, we cannot conclude that, by including the no contest clause in his will, decedent intended to preclude a beneficiary from challenging or otherwise questioning the conduct of a fiduciary. Matter of Prevratil, 2014 NY Slip Op 05478, 3rd Dept 7-24-14

 

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Under Mental Hygiene Law, Claim Made for Payment from Nursing Home Resident’s Guardianship Account During Resident’s Life Had Priority over Claim by Department of Social Services After Resident’s Death

The First Department, in a full-fledged opinion by Justice Acosta, over a dissent, determined that a nursing home (Eastchester) which had submitted a claim for the resident’s (Shannon’s) care to the resident’s guardianship account during the resident’s life had priority over the Department of Social Services, which submitted a claim for the resident’s care (Medicaid) to the resident’s estate after death:

Eastchester, a skilled nursing facility, admitted Edna Shannon into its care in 2005. In 2008, due to Shannon’s need for assistance, and concerns about the proper handling of her finances by third parties, Eastchester commenced a proceeding pursuant to Mental Hygiene Law article 81 to have a guardian appointed for her person and property. It also filed an application for medical assistance for Shannon’s nursing home costs. In 2009, DSS determined that Shannon was eligible for Medicaid, effective September 1, 2008. By order and judgment entered April 24, 2009, Supreme Court appointed Family Service Society of Yonkers as her guardian. Among other things, the court conferred on Family Service Society the authority to pay Shannon’s nursing home expenses and to pay bills after her death. Shannon died in December 2011 at age 87. * * *

As Eastchester was to be paid out of the guardianship account before any funds passed to the estate, its claim had priority over DSS’s claim.  MHL § 81.44(d) provides that, within 150 days of the death of an incapacitated person, the guardian must serve on the personal representative of the decedent’s estate, or if none, the public administrator or chief fiscal officer, a statement of assets and notice of claim, and “except for property retained to secure any known claim, lien or administrative costs of the guardianship,” deliver all guardianship property to the personal representative, public administrator, or chief fiscal officer (emphasis added). Matter of Shannon, 2014 NY Slip Op 04452, 1st Dept 6-17-14

 

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