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Conveyance Was For Convenience (Getting a Loan) and Was Not a Gift—Property Therefore Remained in Decedent’s Estate

The Second Department determined Surrogate’s Court correctly found that the conveyance of a one-third interest in property was for the decedent’s convenience and was not a gift.  Therefore, the one-third interest was in the decedent’s estate:

The petitioner presented evidence establishing that the decedent’s conveyance was for his convenience, and was designed to obtain a refinance mortgage loan on the property at a more favorable interest rate than would have been offered had decedent’s name remained on the title. The petitioner also presented evidence that, after the refinancing was completed, the decedent’s one-third interest in the subject real property was to be reconveyed to him. …

“In a turnover proceeding, the burden of establishing that the property was that of the decedent rests with the petitioner, and once that burden is met, it shifts to the respondent to establish that it was a gift” … . Here, the petitioner met her initial burden of establishing that the one-third interest in the subject real property belonged to the decedent. The petitioner’s proof included, inter alia, deposition testimony given by [decedent’s brother] George in a related proceeding, wherein he acknowledged that the decedent’s one-third interest was to be reconveyed to the decedent after the refinancing. [Decedent’s sister] Elaine failed to come forward with clear and convincing proof that the decedent intended to make a gift of his interest in the subject real property… .  Matter of Voyiatgis, 2013 NY Slip Op 06700, 2nd Dept 10-16-13

 

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Right of First Refusal Not Triggered by Partition Action

In a partition action, the Fourth Department determined the agreement between the parties was a right of first refusal, not an option to purchase, which was not triggered by the partition action.  The court explained the operative law:

Plaintiff and Waite [one of the defendants] are tenants in common and acquired the property at issue by an executor’s deed pursuant to the settlement of their mother’s estate.  In settling that estate, plaintiff, Waite and the other named defendants signed a settlement agreement providing that plaintiff and Waite “agree to grant to [each of the other named defendants] the option to purchase the . . . property, in the event that [plaintiff and Waite], either jointly or severally, determine to sell, assign or transfer the . . . property to someone other than each other.  The option price shall be [$120,000] plus the costs of any improvements made by [plaintiff and Waite] to the premises subsequent to [their] purchase of the premises.  Said option may be prepared in recordable form by any or all of the [other named defendants] at their own cost and expense, and [plaintiff and Waite] will execute any said recordable option.  Upon receipt of an offer to purchase the premises, except from [each other], [plaintiff and Waite] shall notify each of the [other named defendants] then living, in writing of the proposed sale of the premises, and the [other named defendants] shall have sixty (60) days to exercise their option as granted herein.” * * *

We conclude that the right bestowed by the settlement agreement … is a right of first refusal, not an option to purchase, despite the use of the term “option” therein …, and thus that Supreme Court mistakenly treated the contractual right as an option to purchase.  “A right of first refusal is a dormant right that is triggered when an owner decides to sell the property to a third party at an agreed-upon price” …, and those are the applicable facts set forth in the settlement agreement.

We agree with Waite on her appeal that the court erred in determining that the contractual right was triggered upon plaintiff’s commencement of the instant action, for partition and sale.  It must first be determined in a partition action whether the property may be partitioned, i.e., divided among the owners in some fashion, without great prejudice to them, and “partition sale” is a secondary consideration only in the event that partition greatly prejudices the owners (see RPAPL 901 [1]…).  Thus, commencement of the partition action did not trigger the right of first refusal inasmuch as a partition, as opposed to a partition sale, would not result in a transfer of the property to a third party.  Furthermore, no offer of purchase from a third party triggered either the right of first refusal or the contractual obligation of plaintiff or Waite pursuant to the settlement agreement or recorded document. Tuminno v Waite…, 915, 4th Dept 10-4-13

 

 

Criteria for Denial of Trustee Commission for Misconduct Explained (Commission Was Not Denied Here)

The First Department explained the criteria for determining whether a trustee can be denied an annual commission for misconduct.  The court ultimately concluded the commission should not be denied in this case:

We conclude that courts have the discretion to take into consideration all of a trustee’s misconduct in determining the grant of annual commission, even conduct that occurred after the period applicable to the commission. Although there are no appellate cases on point, no New York case holds otherwise. As a basic principle, the Surrogate has broad discretion to deny commission to a trustee if the trustee has engaged in misconduct … . In determining if a commission should be denied, misconduct that is not directly related to the commission being sought may be taken into consideration … . The Restatement (Second) of Trusts § 243 supports this conclusion with a multi-factor analysis (Comment c). Among the factors to be considered under the Restatement in determining if a commission should be denied are whether the trustee acted in good faith, if the misconduct related to management of the whole trust and if the trustee completed services of value to the trust (id.). We conclude, therefore, it is within the court’s discretion to determine whether the trustee’s later misconduct bars her from receiving commission.

Trustees can be denied commission “where their acts involve bad faith, a complete indifference to their fiduciary obligations or some other act that constitutes malfeasance or significant misfeasance” …. The denial of a commission, however, should not be “in the nature of an additional penalty” (Restatement 243, Comment a). Rather, it should be based on the trustee’s failure to properly serve the trust, not designed as an additional punishment … . Indeed, even the beneficiaries in this case state that it will be rare that a trustee’s later misconduct will serve as the basis for a denial of commission. Matter of Gregory Stewart Trust, 2013 NY Slip Op 06079, 1st Dept 9-26-13

 

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Husband’s Contribution to Purchase of Home by Wife’s Parents Constituted a Constructive Trust

In a divorce action, the Second Department affirmed Supreme Court’s determination that the husband’s [Henn’s] contribution toward the purchase of a house constituted a constructive trust.  The parties separated before Henn moved into the home.  The wife’s [Tyree’s] parents [the Raffas] contributed some money and purchased the home for Henn and Tyree, both of whom also contributed funds toward the purchase.  In concluding Henn’s contribution constituted a constructive trust, the court wrote:

Here, the Supreme Court correctly found that the first element relevant to imposing a constructive trust was satisfied, as Henn and the Raffas were related through marriage and they pooled their resources to purchase the subject premises … . Henn satisfied the second element by demonstrating that the Raffas implicitly promised to convey the premises to him and Tyree … . He satisfied the third element, which requires a showing that he acted in reliance on the promise, by establishing that he gave $58,500 to Samuel J. Raffa, and that Samuel J. Raffa used that money to purchase the premises … . As for the fourth element, which requires a showing of unjust enrichment flowing from the breach of the promise, the evidence adduced at trial established that Henn never moved into the premises or acquired a legal interest therein. To the contrary, he and Tyree separated the very month that the premises were acquired by the Raffas, and Tyree commenced this divorce action just a few months later. The Raffas remained the sole owners of the premises, and they did not return Henn’s $58,500. In view of this evidence, there is no basis upon which to disturb the Supreme Court’s determination… . Tyree v Henn, 2013 NY Slip Op 05895, 2nd Dept 9-18-13

 

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Defendant in Medical Malpractice Action Should Have Been Allowed to Amend His Answer to Add Statute of Limitations Affirmative Defense

The Second Department reversed Supreme Court’s denial of defendant’s motion to amend his answer by adding the passing of the statute of limitations as an affirmative defense.  The Second Department explained:

Here, it is undisputed that the two-year statute of limitations applicable to a cause of action alleging wrongful death began to run on August 14, 2007, the date of the decedent’s death (see EPTL 5-4.1), and that the plaintiff commenced the second action, in which Lehman was a named defendant, more than two years after the decedent’s death. Accordingly, Lehman’s proposed affirmative defense of the statute of limitations as to so much of the complaint as sought to recover damages for wrongful death was not palpably insufficient nor patently devoid of merit on its face, and the plaintiff’s contentions regarding the relation back doctrine (see CPLR 203[b]) did not warrant the denial of Lehman’s motion. Consequently, as there was no evidence that the amendment would unfairly prejudice the plaintiff, the Supreme Court should have granted Lehman’s motion for leave to amend his answer without conducting a further examination into the ultimate merits of the proposed amendment … . “If [the plaintiff] wishes to test the merits of the proposed added . . . defense, [the plaintiff] may later move for summary judgment upon a proper showing” … . Carroll v Motola, 2013 NY Slip Op 05728, 2nd Dept 8-28-13

 

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Method of Service of Citation Should Be Calculated to Provide Notice Based Upon Facts Known To Court

The Second Department determined a decree (admitting decedent’s will to probate) issued by Surrogate’s Court should have been vacated on the ground that decedent’s daughter (Ross) was never properly served with the citation and, therefore, the court never obtained personal jurisdiction over her.  The Second Department explained that Surrogate Court should have fashioned a method of service, based upon the unique facts of the case known to the court, that was best calculated to notify Ross:

An elementary and fundamental requirement of due process in any proceeding which is accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections”… . In making a determination as to whether notice is “reasonably calculated,” the unique information about an intended recipient must be considered, “regardless of whether a statutory scheme is reasonably calculated to provide notice in the ordinary case” … . Here, given that the Surrogate’s Court was aware that Ross and her family would be away from her home in Sloatsburg until sometime in late September 2008, and was vacationing in Long Beach Island during that time, and given that there was no indication that Ross’s address in Long Beach Island was unavailable, in order for notice of the probate proceeding to be reasonably calculated to reach Ross, the Surrogate’s Court should have at least directed that the supplemental citation be mailed to Ross’s address in Long Beach Island, instead of solely directing that the supplemental citation be mailed to Ross’s address in Sloatsburg.  Matter of Skolnick, 2013 NY Slip Op 05463, 2nd Dept 7-24-13

 

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Pecuniary Loss Defined

In a wrongful death action, the Fourth Department determined that plaintiff, decedent’s brother, was entitled only to pecuniary loss for funeral expenses.  In explaining pecuniary loss, the court wrote:

Damages in a wrongful death action are limited to “fair and just compensation for the pecuniary injuries resulting from the decedent’s death to the persons for whose benefit the action is brought” (EPTL 5-4.3 [a]).  “Pecuniary loss” is defined as “the economic value of the decedent to each distributee at the time decedent died” and includes loss of income and financial support, loss of household services, loss of parental guidance, as well as funeral expenses and medical expenses incidental to death….  Generally, because it is difficult to provide direct evidence of wrongful death damages, the calculation of pecuniary loss “is a matter resting squarely within the province of the jury”… .  On this record, we conclude that there are issues of fact with respect to whether plaintiff, as decedent’s brother, suffered pecuniary loss in the form of funeral expenses and whether decedent’s brother Matthew suffered pecuniary loss given the evidence of their longstanding close and interdependent relationship.  Milczarski … v Walaszek…, 656, 4th Dept 7-19-13

 

Criteria for Denial of Trustee Commissions Based On Misconduct, Including Post-Commission-Period Misconduct, Explained

The First Department discussed when a trustee can be denied commissions for misconduct, including misconduct after the commission period (a post-commission-period penalty is rare and none was imposed here):

We conclude that courts have the discretion to take into consideration all of a trustee’s misconduct in determining the grant of annual commission, even conduct that occurred after the period applicable to the commission. Although there are no appellate cases on point, no New York case holds otherwise. As a basic principle, the Surrogate has broad discretion to deny commission to a trustee if the trustee has engaged in misconduct… .. In determining if a commission should be denied, misconduct that is not directly related to the commission being sought may be taken into consideration … . The Restatement (Second) of Trusts § 243 supports this conclusion with a multi-factor analysis (Comment c). Among the factors to be considered under the Restatement in determining if a commission should be denied are whether the trustee acted in good faith, whether the misconduct related to management of the whole trust and whether the trustee completed services of value to the trust (id.). We conclude, therefore, it is within the court’s discretion to determine whether the trustee’s later misconduct bars her from receiving commission.

Trustees can be denied commission “where their acts involve bad faith, a complete indifference to their fiduciary obligations or some other act that constitutes malfeasance or significant misfeasance” … The denial of a commission, however, should not be “in the nature of an additional penalty” (Restatement (Second) of Trusts § 243, Comment a). Rather, it should be based on the trustee’s failure to properly serve the trust (see id.). Matter of Gregory Stewart Trust, 2013 NY Slip Op 05290, 1st Dept 7-16-13

 

Criteria for Constructive Trust Not Met

In affirming Supreme Court’s ruling that plaintiff had failed to establish money given to the defendant (plaintiff’s son) by the plaintiff, originally for the purchase of a lake house, was held by the defendant as a constructive trust, the Third Department explained:

Plaintiff failed to establish the necessary elements of a constructive trust, which include a confidential or fiduciary relationship, a promise, a transfer in reliance thereon and  unjust enrichment….    Although plaintiff contends that there was a relationship of trust at the time the money was given to defendant based on the familial relationship and plaintiff’s belief that, despite his criminal history, defendant had  turned his life around,  this argument  is contradicted  by plaintiff’s own testimony that he and defendant were “never too friendly,” his relationship with defendant was  “at arm’s length” and he felt defendant was “always . . . hiding something from me.”    Furthermore, there was no indication that defendant attempted to take advantage of plaintiff’s trust by encouraging the transfer or that plaintiff was under defendant’s influence in any way.    The record supports Supreme Court’s finding that the idea of buying a lake house was eventually abandoned and the money was given to defendant for placement in a mutual fund account in his name alone by plaintiff, who had significantly more education, business and  financial experience  than  defendant.  Garcia v Garcia, 515582, 3rd Dept 7-11-13

 

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Executor’s Motion to Be Substituted for Decedent in Negligence Action Too Late

In affirming the dismissal of an executor’s motion to be substituted as a party in a negligence action (on behalf of the decedent), the Second Department explained:

CPLR 1021 provides, in pertinent part, “[i]f the event requiring substitution occurs before final judgment and substitution is not made within a reasonable time, the action may be dismissed as to the party for whom substitution should have been made, however, such dismissal shall not be on the merits unless the court shall so indicate.” CPLR 1021 requires a motion for substitution to be made within a reasonable time … . The determination of reasonableness requires consideration of several factors, including the diligence of the party seeking substitution, the prejudice to the other parties, and whether the party to be substituted has shown that the action or the defense has potential merit….

The Supreme Court providently exercised its discretion in denying the appellant’s motion pursuant to CPLR 1015 for leave to substitute himself as a party plaintiff and granting the defendant’s cross motion pursuant to CPLR 1021 to dismiss the complaint, in light of the 21-month delay in obtaining preliminary letters testamentary, the further one-year delay in seeking substitution, the failure to demonstrate a reasonable excuse for the delays, the absence of any affidavit of merit, and the prejudice to the defendant… .  Terpis v Regal Hgts Rehabilitation & Health Care Ctr Inc, 2013 NY Slip Op 05200, 2nd Dept 7-10-13

 

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