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Elements of Constructive Trust Not Demonstrated 

The plaintiff had conveyed her 25% interest in real property to her cousin, allegedly with the understanding plaintiff would share in the proceeds if the property were sold. Eventually the cousin was deeded 100% of the property. The cousin lived on the property from 1989 to 2005.  The cousin deeded the property to her brother and his wife, the defendants. The defendants maintained the house and paid taxes on it, although they did not live there.  The plaintiff did not contribute to the property maintenance or taxes and did not submit any proof that the defendants had been unjustly enriched by owning the property (i.e. rental income). The Second Department upheld the referee in finding that the plaintiff had not proved the elements of a real-property constructive trust.  The Second Department explained the elements as follows:

“The elements of a constructive trust are a confidential or fiduciary relationship, a promise, a transfer in reliance thereon, and unjust enrichment… . These requirements, however, are not to be rigidly applied …. The ultimate purpose of a constructive trust is to prevent unjust enrichment, and it will 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'” ….  Broderson v Parsons, 2013 NY Slip Op 03050, 2nd Dept, 5-1-13

 

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Undue Influence and Constructive Fraud Causes of Action Against Attorney Should Not Have Been Dismissed

The First Department reversed Surrogate’s Court’s dismissal of undue influence and constructive fraud causes of action against an attorney who was the beneficiary of a one million dollar trust account created by the decedent.  In finding questions of fact had been raised concerning both causes of action, in part concerning whether the attorney had misrepresented his financial condition to the decedent, the First Department wrote:

Surrogate’s Court erred in dismissing the claim of undue influence as there were conflicting inferences of both undue influence and the lack thereof. For example, the evidence showed that, from September 2009 to January 2010, as decedent’s health continued to deteriorate, defendant repeatedly wrote and called decedent to request the creation of a $1 million trust account and suggested that he would suffer a financial crisis if he did not receive it, and decedent complained to plaintiff (his wife) that defendant would not stop asking him for money. … Under the circumstances presented, defendant failed to overcome the presumption of undue influence and failed to eliminate any triable issue of fact warranting dismissal of the count ….  * * *  The count of constructive fraud was also improperly dismissed. Defendant, who had a substantial net worth at the time of decedent’s death, nevertheless repeatedly represented that his savings were deteriorating and that he would suffer a financial crisis if decedent did not give him the $1 million. While decedent was aware of the salary paid to defendant over the years as counsel to decedent’s company, this alone did not amount to clear evidence to eliminate any triable issue of fact as to whether defendant had misrepresented his financial condition, and whether decedent relied upon it … .  Matter of Schneiderman, 2013 NY Slip Op 02687, 1st Dept, 4-23-13

 

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Forum Selection Clause Requiring All Enforcement Actions to be Brought in Surrogate’s Court Enforced 

A forum-selection clause in a stipulation required any action necessary to enforce the terms of the stipulation be brought in Surrogate’s Court, Queens County.  When a proceeding to discharge a mortgage, which was related to the stipulation, was brought in Supreme Court, Queens County, the court dismissed the proceeding with leave to renew in Surrogate’s Court pursuant to the forum-selection clause. In affirming, the Second Department wrote:

 “Although once disfavored by the courts, it is now recognized that parties to a contract may freely select a forum which will resolve any disputes over the interpretation or performance of the contract” … . “A contractual forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court” … . Matter of Chiantella v Lucy Chiantella Revocable Trust of 2002, 2013 NY Slip Op 02575, 2012-01935, Index No 1853/11, 2nd Dept 4-17-13

 

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Whether a Confidential Relationship Existed With Decedent Is a Question of Fact for the Jury; Application of Dead Man’s Statute Explained

In reversing the Surrogate’s Court verdict, the Third Department, in a decision by Justice Spain, determined that the existence of a confidential relationship with the decedent is a question of fact for the jury (Surrogate’s Court determined the existence of the relationship as a matter of law).  In addition, because the matter is to be retried, the Third Department included a useful discussion of how the Dead Man’s Statute (CPLR 4519) should be applied:

Under  the  doctrine of “‘constructive fraud,'” where  a  confidential relationship exists between  two parties to a transaction “‘such that they were dealing on unequal terms due to one party’s weakness, dependence or trust  justifiably reposed  upon  the  other  and  unfair advantage  is rendered  probable,'” the  burden  of proof  with  respect to allegations of undue influence will be shifted to the stronger party to show, by clear and convincing evidence, that no undue influence was used … In determining whether a confidential  relationship  exists,  “the  existence  of  a  family relationship does  not, per se, create a presumption  of undue influence; there must be evidence of other facts or circumstances showing  inequality  or  controlling influence” … ..The  existence of such a relationship will ordinarily be  a question of fact … . *  *  *

The [Dead Man’s] statute precludes an interested party from being “examined as a witness in his [or her] own behalf or interest . . . concerning a personal transaction or communication between the witness and  the deceased person” (CPLR 4519 …). Given that the “purpose of the rule is ‘to protect the estate of the deceased from claims of the living who, through their own perjury, could make factual assertions which the decedent could not refute in court’…, it   will not preclude any testimony elicited by the representative of the estate, nor does it preclude testimony of transactions between decedent and a non-interested third party …. Further, the statute’s protections with regard to a particular transaction may be waived where the representative “testifies in his [or her] own behalf concerning a personal transaction of his adversary with the deceased” or when he or she “elicits testimony from an interested party on the personal transaction in issue” …  .  Matter of Nealon, 513733, 3rd Dept 3-28-13

 

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No Proof Misrepresentation Caused Decedent to Disinherit Daughter

In reversing a jury verdict finding that a will had been procured by fraud, i.e., a misrepresentation made to the decedent by one daughter, Zucker, against the other daughter, Ranaldo, resulting in the disinheritance of Ranaldo, the Second Department wrote:

…[T]here was no evidence presented at trial to demonstrate that Zucker conveyed the alleged misrepresentation to the decedent with the intention of inducing the decedent to alter her estate plan …, or that the alleged misrepresentation in fact induced the decedent to change her testamentary plan. There was no evidence presented to show that the decedent considered or discussed disinheriting Ranaldo when she met with her attorney two weeks after the alleged misrepresentation. The decedent’s attorney, who drafted the will, testified that the first time the decedent mentioned disinheriting Ranaldo was at a subsequent meeting, approximately eight months after the alleged misrepresentation. In the absence of any evidence to establish that Zucker conveyed the alleged misrepresentation to the decedent with the intention of inducing the decedent to alter her estate plan, and that the alleged misrepresentation in fact induced the decedent to change her testamentary plan, no valid line of reasoning and permissible inferences could lead a rational person to the conclusion reached by the jury that the will and the first amendment to the Trust were the product of fraud … . Accordingly, the jury’s verdict was not supported by legally sufficient evidence … .  Matter of Ranaldo, 2013 NY Slip Op 01834, 2011-03624, 2011-03625, 2nd Dept. 3-20-13

 

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Old Age, Infirmity, Dementia and Medical Opinion Did Not Demonstrate Lack of Testamentary Capacity

In affirming the dismissal of objections to a will, the Fourth Department explained that proof the decedent suffered from old age, infirmity and dementia was not necessarily inconsistent with testamentary capacity, and, where there is direct evidence the decedent had the necessary ability to understand, even medical opinion is of minor importance:

“It is the indisputable rule in a will contest that ‘[t]he proponent has the burden of proving that the testator possessed testamentary capacity and the [Surrogate] must look to the following factors: (1) whether []he understood the nature and consequences of executing a will; (2) whether []he knew the nature and extent of the property []he was disposing of; and (3) whether []he knew those who would be considered the natural objects of h[is] bounty and h[is] relations with them’ ” … .“ ‘Mere proof that the decedent suffered from old age, physical infirmity and . . . dementia when the will was executed is not necessarily inconsistent with testamentary capacity and does not alone preclude a finding thereof, as the appropriate inquiry is whether the decedent was lucid and rational at the time the will w made’ ”… . “Where there is direct evidence that the decedent possessed the understanding to make a testamentary disposition, even ‘medical opinion evidence assumes a relatively minor importance’ ”….  In the Matter of Alibrandi, 136, CA 12-00963, 4th Dept. 3-15-13

 

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Co-Executor Can Object to Final Accounting Solely By Virtue of the Executor’s Fiduciary Duty to the Estate 

In finding that a co-executor (who could no longer be sued by any of the beneficiaries because all had executed releases) had standing to contest a final accounting submitted by the other co-executor, the Fourth Department wrote:

An executor is a fiduciary who owes “a duty of undivided loyalty to the decedent and ha[s] a duty to preserve the assets that [decedent] entrusted to them” …, and “an executor’s duties are derived from the will itself, not from the letters issued by the Surrogate” … .

“Suffice it to say, an executor who knows that his co[-]executor is committing breaches of trust and not only fails to exert efforts directed towards prevention but accedes to them is legally accountable” … .

…[T]the Surrogate concluded that, because there were no remaining creditors of the estate and all of the other beneficiaries had executed releases absolving objectant of liability, objectant no longer had standing as a co-executor to file any objections to petitioner’s final accounting. * * *

Contrary to the Surrogate’s conclusion, the mere fact that the estate has no creditors and objectant can no longer be sued successfully by any of the beneficiaries does not establish that he has fulfilled his fiduciary duty to the decedent and the estate so as to vitiate his standing to raise objections to the accounting filed by the co-executor.

An executor’s duty is not fulfilled merely because he or she has obtained releases from liability.

The standard of care for a fiduciary cannot be set so low; rather, a fiduciary has a “duty of active vigilance in the collection of assets belonging to the estate” …   In the Matter of Schultz, 51, CA 12-01283, 4th Dept. 3-15-13

 

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Supreme Court Has the Power to Appoint a Temporary Representative to Substitute for a Defendant in a Personal Injury Action

One of the defendants in a personal injury action died.  The plaintiff moved pursuant to CPLR 1015 to have Supreme Court appoint a temporary representative of the estate, and to have the temporary representative substituted for the deceased defendant. The defendants opposed the motion arguing that Surrogate’s Court was the appropriate forum for the appointment of a temporary administrator. In finding that Supreme Court could make the appointment, the Second Department wrote:

“In most instances the personal representative of the decedent’s estate should be substituted in the action” …. However, in the event no such representative exists, an appropriate appointment should be made and that individual should be substituted in place of the decedent … . “In determining who shall be substituted for the decedent, conflict of interest questions may be raised” … .

The Second Department, however, determined that the person Supreme Court appointed, the attorney for the insurance company defending the action, had a conflict of interest because the insurance company had disclaimed coverage for the subject accident.  The matter was remitted for the appointment of a different temporary administrator.  Dieye v Royal Blue Services, Inc., 2012 NY Slip Op 01527, 2012-03428, Index No 3392/09, 2nd Dept. 3-13-13

 

Stepmother Had Right to Portion of Children’s Trust Under Spouse’s Right of Election

Petitioners were the children of the grantors of a trust and were co-beneficiaries of the trust.  The grantors of the trust were the beneficiaries’ mother and father. The mother died and respondent was the children’s stepmother.  The children moved to dismiss the objections to the trust accounting made by the respondent-stepmother on the ground she did not have standing.  In ruling the stepmother had standing pursuant to the right of election, the Third Department wrote:  …[A] revocable trust … is a testamentary substitute, subject to [the surviving spouse’s] right of election … . Where a trustee voluntarily commences judicial settlement of the account of a trust, process must be provided ‘to all persons who are entitled absolutely or contingently by the terms of the will, lifetime trust instrument or by operation of law to share in the estate’ …” .  The surviving spouse, by operation of law, was entitled to a portion of the estate, including the trust.  In the Matter of Garrasi …, 515128, 3rd Dept. 3-7-13

 

Question of Fact Existed About Whether Lost or Destroyed Will Had Been Revoked.

A question of fact precluded summary judgment denying probate where there was evidence the decedent did not intend to revoke a will that could not be found after her death.  There is a presumption that a will that was last in decedent’s possession but can not be found after death has been revoked.  But in this case there was evidence that the decedent was, close in time to her death, taking steps to dispose of her property in accordance with her will, which expressly disinherited one of her four children.  Matter of DiSiena, et al, 515209, Third Dept. 2-28-13

 

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