You are here: / Trusts and Estates

“Confidential Relationship” With Decedent Not Demonstrated As a Matter of Law

The Third Department determined Supreme Court properly ruled that petitioners had not demonstrated, as a matter of law,  the existence of a confidential relationship between the decedent and respondent. Where a confidential relationship is demonstrated, the stronger party has the burden of showing by clear and convinciing evidence that a particular transaction from which the stronger party benefitted was not the result of undue influence.  The court explained the operative criteria for a confidential relationship:

A confidential relationship is one that is “of such a character as to render it certain that [the parties] do not deal on terms of equality” … . Such inequality may occur from either one party’s “superior knowledge of the matter derived from a fiduciary relation, or from an overmastering influence” or from the other’s “weakness, dependence, or trust justifiably reposed” on the stronger party … .

The limited issue presented on this appeal is whether Supreme Court erred when it declined to find, as a matter of law, that there was a confidential relationship between respondent and decedent. The basis for petitioners’ claim that such a relationship existed was, in part, the familial relationship between respondent and decedent. A familial relationship, however, is not necessarily a confidential relationship … . Importantly, the existence of a confidential relationship is ordinarily a factual determination based upon “evidence of other facts or circumstances showing inequality or controlling influence”… . Matter of Bonczyk v Williams, 2014 NY Slip Op 05231, 3rd Dept 7-10-14

 

Surrogate’s Court Properly Declined to Suspend the Fiduciaries’ Letters Testamentary and Letters of Trusteeship Pending a Hearing to Determine the Contested Facts

The Second Department determined Surrogate’s Court properly declined to suspend the fiduciaries’ letters testamentary and letters of trusteeship pending the outcome of an accounting proceeding.  Although allegations of comingling property would support such a suspension, the allegations were contested and it would be an abuse of discretion to order the suspension without a hearing:

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” … .

Nevertheless, pursuant to SCPA 719(7), “letters [issued to a fiduciary] may be suspended, modified or revoked, or a lifetime trustee removed or his powers suspended or modified, without process. . . . [w]here he mingles the funds of the estate with his own or deposits them with any person, association or corporation . . . in an account other than as fiduciary” (SCPA 719[7] [emphasis added]). Fiduciary letters also may be suspended without process “[w]here any of the facts provided in 711 are brought to the attention of the court” (SCPA 719[10]).

However, as noted in Matter of Duke (87 NY2d 465),

“[w]hile the Surrogate is clearly granted the exceptional authority to summarily remove executors without the formality of commencing a separate proceeding, the authority to exercise the ultimate sanction summarily is not absolute. The Surrogate may remove 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 amendment of letters are presented to the court during a related evidentiary proceeding” (Matter of Duke, 87 NY2d at 472-473 [internal citations omitted; emphasis added]).

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” … .

Contrary to the appellants’ contention, the allegations in this case are sharply disputed and give rise to conflicting inferences regarding the Fiduciaries’ alleged misconduct. Matter of Mercer, 2014 NY Slip Op 05186, 2nd Dept 7-9-14

 

Petitioner Sufficiently Alleged She Is a Nonmarital Child of the Decedent—Probate Decree Properly Vacated

The Second Department determined Surrogate’s Court properly vacated a probate decree based upon petitioner’s assertion she is a nonmarital child of the decedent:

Here, the petitioner … sufficiently alleged that the decedent … “openly and notoriously acknowledged [her] as his own [child]” and, thus, she may be entitled to inherit from him (EPTL 4-1.2[a][2][C][ii]…). Accordingly, the Surrogate’s Court properly denied the executor’s motion pursuant to CPLR 3211(a) to dismiss the petition.

” Because vacatur disrupts the orderly process of administration and creates a continual aura of uncertainty and nonfinality, a probate decree will be vacated only in extraordinary circumstances'” … . “However, it is equally true that the Court should also be slow to say that an injustice may not be corrected'” … . “A petitioner seeking to vacate a probate decree must establish with some degree of probability that his claim is well founded, and that, if afforded an opportunity, he will be able to substantiate it'” … . An application to vacate a probate decree is committed to the discretion of the court … . Here, the petitioner showed with some degree of probability that she is a nonmarital child of the decedent and that, if afforded an opportunity, she will be able to substantiate her claim. Matter of Saginario, 2014 NY Slip Op 05192, 2nd Dept 7-9-14

 

, , ,

Constructive Trust Cause of Action Sufficiently Pled/Dismissal “With Prejudice” Not Allowed—Doctrine of Res Judicata Does Not Apply—a Dismissal for Failure to State a Cause of Action Is Not On the Merits

The Second Department determined Supreme Court should not have dismissed the constructive trust cause of action.  The court further determined that the conversion, constructive fraud and breach of contract causes of action were properly dismissed for failure to state a cause of action, but should not have been dismissed “with prejudice.”  With respect to the constructive trust and the dismissal with prejudice, the court wrote:

The equitable remedy of a constructive trust may be imposed ” [w]hen 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 cause of action to impose a constructive trust are (1) the existence of a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment” … . “To achieve equity and avoid unjust enrichment, the courts apply these factors flexibly rather than rigidly” … .

Here, the plaintiff sufficiently alleged the existence of a confidential or fiduciary relationship with the defendants. The parties were related through marriage, and the plaintiff and Atanasio, along with their respective spouses, pooled their resources in order to purchase the residential property and the boat … . Further, the plaintiff sufficiently pleaded the elements of a promise and a transfer in reliance on the promise. He alleged that, before he sold the defendants his interest in the property in November 2005, the defendants promised to reimburse him for the expenditures he made for the property and boat as long as he continued making those payments for one year after the sale of his interest. In reliance on this alleged promise and his confidential relationship with the defendants, he transferred his interest in the property to the defendants, and thereafter continued to make expenditures in connection with the property and boat. Finally, his allegations that he made all expenditures for the property and boat during a period of 7½ years, and that the defendants refused to reimburse him, despite being co-owners of the property and boat and notwithstanding their promise, were sufficient to plead the unjust enrichment element necessary to the imposition of a constructive … .

…Supreme Court, upon dismissing the second, third, and fourth causes of action, improperly did so “with prejudice.” A dismissal for failure to state a cause of action based on the insufficiency of the allegations in the pleading is not a dismissal on the merits, and does not bar the adequate repleading of the claim in a subsequent action… . Canzona v Atanasio, 2014 NY Slip Op 04458, 2nd Dept 6-18-14

In a related case, the Second Department noted that, because a dismissal for failure to state a cause of action is not on the merits, the doctrine of res judicata does not apply.  Canzona v Atanasio, 2014 NY Slip Op 04459, 2nd Dept 6-18-14

 

No Assets Left to Distribute—Disposition of a Painting Which Was Part of the Estate and Had Been Donated to a Museum Could Be Protected by the Attorney General (Charged with Protecting the Donor’s Wishes)–No Need to Issue Letters of Administration to Petitioner to Ensure Proper Use of the Painting

The Fourth Department determined letters of administration should not have been granted because all the assets of the estate had been distributed.  The letters were sought by a relative of the decedent who was concerned about the disposition of a valuable painting which was a charitable gift to a museum and could not be otherwise disposed of without a court order.  The court concluded that the disposition of the painting could be protected by the Attorney General:

…[W]e … conclude that [the Surrogate] erred in granting letters of administration c.t.a. to petitioner. It is undisputed that there are no assets of the estate that have not been administered … . As the Court of Appeals has written, “[t]here may be cases where letters of administration are necessary to be granted for other purposes than the recovery and distribution of assets[,]” including a “claim in respect to them which can be enforced” … . Nevertheless, we conclude that any claim with respect to the painting is to be “enforced by the [Attorney General], pursuant to his duty to effectuate the donor’s wishes” …, and we conclude that letters of administration c.t.a. are not “necessary” … .

We further conclude that limited letters of administration also are not “appropriate or necessary in respect of the affairs of the estate” (SCPA 702 [10]…). … [T]he Surrogate has previously prohibited the disposition of the painting without court approval, and there is no basis to conclude that the Attorney General is not properly fulfilling his duty to protect the decedent’s wishes with respect to the bequest to the Emerson Foundation … . Matter of Seward, 2014 NY Slip Op 04317, 4th Dept 6-13-14

 

, ,

“No Action” Clause In a Trust Indenture Interpreted Narrowly Under Established Principles of Contract Interpretation—The Clause Did Not Preclude Suit By Securityholders Based Upon Their Common Law and Statutory Rights In an Action Stemming from the “Credit Default Swap” Crisis

In an action arising out of the credit default swap crisis, the Court of Appeals, in a full-fledged opinion by Judge Rivera, determined that a “no action” clause, which imposed restrictions on actions brought by securityholders, must be construed narrowly according to its terms.  The “no action” clause stated in pertinent part:  “Limitations on Suits by Securityholder. No holder of any Security shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture… .”  The “Indentures” were agreements entered into with trustees who served as third party administrators of the issuance of securities.  The Court of Appeals held that the clause related solely to actions “with respect to this Indenture” and did not affect the common law and statutory actions brought by securityholders to enforce their rights:

A trust indenture is a contract, and under New York law “[i]nterpretation of indenture provisions is a matter of basic contract law” … .

In construing a contract we look to its language, for “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” … . As the case law further establishes, we read a no-action clause to give effect to the precise words and language used, for the clause must be “strictly construed” … .

Applying these well established principles of contract interpretation, and with the understanding that no-action clauses are to be construed strictly and thus read narrowly, we turn to the language of the no-action clause presented by the certified question. The no-action clause here states that no securityholder “shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture . . .”. The clear and unambiguous text of this no-action clause, with its specific reference to the indenture, on its face limits the clause to the contract rights recognized by the indenture agreement itself. Further supporting this construction of the clause is the sole textual reference to securities, which is contained in the clause's provision for a Trustee-initiated suit for a continuing “default in respect of the series of Securities.”[FN11] This part of the no-action clause permits the trustee to sue in its name, after notice by a securityholder of a continuing default and upon approval of the suit by a majority of securityholders. Thus, the clear import of the no-action clause is to leave a securityholder free to [*10]pursue independent claims involving rights not arising from the indenture agreement. Quadrant Structured Prods Co Ltd v Vertin, 2014 NY Slip Op 04114, CtApp 6-10-14

 

EPTL 2-1.13, Which Required that Certain Formula Clauses in Trusts and Wills Be Calculated as if Federal Estate Taxes Were Paid in 2010 (When the Tax Had Expired) , Did Not Apply to the Grantor Retained Annuity Trusts at Issue Here

The First Department determined Surrogate’s Court properly determined how to distribute two grantor retained annuity trusts (GRATs).  The grantor died in 2010. Because the federal estate had expired in 2010, executors were permitted to pay no estate tax that year and the executors so elected in this case. A clause in the GRATs provided that whatever fraction of the assets in the GRATs is “includable in the Grantor’s gross estate for Federal estate tax purposes” passes into the estate, and any remainder is distributed equally to the three children.   The court held that EPTL 2-1.13, which required that, in 2010, certain formula clauses in trusts and wills be calculated as if the federal estate tax had been paid, did not apply.  Therefore, all of the assets in the GRATs were to be distributed equally:

A review of the legislative history of EPTL 2-1.13(a)(1) reveals that its purposes were quite narrow and that it was primarily a legislative fix enacted to prevent the thwarting of the well-intentioned estate plans of those who, in good faith reliance on the existence of an estate tax in 2010, bequeathed significant portions of their estates to persons other than their spouses, so they could take full advantage of the spousal estate tax exemption. For people who died in 2010, the expiration of the estate tax not only nullified oft-utilized tax planning strategies, but threatened to leave their spouses with less money than they otherwise would have received, and with no concurrent benefit. The Legislature, by enacting EPTL 2-1.13(a)(1), saved these estate plans by permitting their creators to adopt the fiction that they paid an estate tax, even if they did not.

There is no evidence here that the GRATs at issue were created with the specific goal of taking advantage of spousal exemptions based on the federal estate tax, or were structured for similar purposes. Further, the Legislature did not contemplate that the repeal of the tax law would implicate the formula clause at issue here. The clause here references federal estate tax laws not to minimize tax liability, but to account for an uncertain value to include in the taxable estate upon death of the grantor, to be distributed in proportion to each of the beneficiaries’ taxable share of the estate … . Thus, contrary to petitioner’s assertions, the GRATs’ reference to the amount of trust property “includible in the Grantor’s gross estate for Federal estate tax purposes” is not analogous to the “amount that can pass free of federal estate taxes, or that is otherwise based on a similar provision of federal estate tax,” as EPTL 2-1.13(a)(1) recites.  Matter of Kirschner v Fisher, 2014 NY Slip Op 03626, 1st Dept 5-20-14

 

, ,

Releases Effectively Prohibiting Decedent’s Exercise of a Power of Appointment In Favor of Decedent’s Wife Were Not Procured by Constructive Fraud

The First Department reversed Surrogate’s Court and determined that releases restricting decedent’s power of appointment were not procured by constructive fraud (as a matter of law) and were enforceable.  The releases allowed decedent to exercise powers of appointment re: a trust only in favor of a descendant. Decedent’s wife was the beneficiary of a codicil, executed by the decedent after the execution of the releases, which purported to award her 25% of the trust plus the income from 75% of the trust for life. In finding the wife had not raised a question of fact about whether the releases were procured by constructive fraud, the court wrote:

The principles underlying the concept of constructive fraud are of long-standing duration:

“It may be stated as universally true that fraud vitiates all contracts, but as a general thing it is not presumed but must be proved by the party seeking to relieve himself from an obligation on that ground. Whenever, however, the relations between the contracting parties appear to be of such a character as to render it certain that they do not deal on terms of equality but that either on the one side from superior knowledge of the matter derived from a fiduciary relation, or from an overmastering influence, or on the other from weakness, dependence, or trust justifiably reposed, unfair advantage in a transaction is rendered probable, there the burden is shifted, the transaction is presumed void, and it is incumbent upon the stronger party to show affirmatively that no deception was practiced, no undue influence was used, and that all was fair, open, voluntary and well understood. This doctrine is wellsettled.” …

“To avoid a release on the ground of fraud, a party must allege every material element of that cause of action with specific and detailed evidence in the record sufficient to establish a prima facie case … . “In the absence of a fiduciary relationship between the parties to the release, the party seeking to avoid the release bears the burden of proving such fraud or other vitiating circumstances”… . Moreover, a release should “not be treated lightly” and “should never be converted into a starting point for renewed litigation” except in cases of “grave injustice” and then, only under “the traditional bases of setting aside written agreements” … . * * *

It is well established that a “party who signs a document without any valid excuse for having failed to read it is conclusively bound by its terms” … . The record is devoid of any excuse, let alone a valid excuse, for failing to read the release prior to signing it … . * * * “[T]o hold a release forever hostage to legal afterthoughts basically vitiates the nature of the release” … .

 Matter of Aoki v Aoki, 2014 NY Slip Op 03433, 1st Dept 5-13-14

 

Surrogate’s Court Should Have Held a Hearing to Determine the Validity of a Handwritten Will Supported by the Affidavits of Two Attesting Witnesses—If Valid, the 2012 Handwritten Will Would Have Revoked the 2002 Will

The Fourth Department reversed Surrogate’s Court and ordered that a hearing be held to determine whether a 2012 will revoked a 2002 will.  The 2012 will was handwritten and included some confusing language, but it was supported by the affidavits of two attesting witnesses.  There was sufficient evidence of the validity of the 2012 will to warrant a hearing:

We conclude that petitioner demonstrated a substantial basis for contesting the 2002 will. Execution of a subsequent will revokes a former will if the subsequent will is “so inconsistent with the former will that the two cannot stand together,” even in the absence of an express revocation clause in the subsequent will … . Here, the 2002 will named respondent as the sole beneficiary, but the 2012 will named petitioner as the sole beneficiary and purported to dispose of all of decedent’s property. We therefore conclude that the provisions of the 2002 will are so inconsistent with those of the 2012 will that, if the Surrogate were “satisfied with the genuineness of the [2012] will and the validity of its execution” (SCPA 1408 [1]), the 2012 will would revoke the 2002 will. Thus, in this case, whether petitioner had a reasonable probability of successfully vacating probate of the 2002 will was dependent upon whether he could prove, through competent evidence, that the 2012 will was genuine and duly executed and attested …. Matter of Gehr, 2014 NY Slip Op 03049, 4th Dept 5-2-14

 

, ,

Antenuptial Agreement Was a Valid Contract Which Controlled Interpretation of Trust Documents

The Third Department applied general principles of contract-interpretation to an antenuptial agreement and trust documents to determine objections to property distribution raised by the surviving wife:

Although the [trust document] makes no explicit mention of the antenuptial agreement, the [trust document] fulfilled decedent’s obligation under that agreement by explicitly creating a trust to benefit [the wife] during her lifetime in an amount in excess of that required by the antenuptial agreement. Further, the [trust document] provides that the trust to benefit [the wife] be funded with assets that “qualify for the marital deduction,” which is consistent with the intentions of the parties as explicitly set forth in the antenuptial agreement. The structure of the [trust document] creates an estate plan that is inconsistent with [the wife’s] claim. The plain language provides for a trust to benefit [the wife] that meets the specific minimum requirements set out in the antenuptial agreement, and the [trust document] conforms to the parties’ intentions regarding tax deductibility expressed in the agreement. Considering this evidence, Surrogate’s Court properly determined that there is no issue of material fact on [the wife’s] claim, because decedent intended to fulfill his obligation under the antenuptial agreement through the [trust] …, and that trust was funded in an amount greater than required by the antenuptial agreement … . Matter of Rich, 2014 NY Slip Op 02982, 3rd Dept 5-1-14

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy