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THE EXECUTOR WAS ENTITLED TO A HEARING ON HIS OBJECTIONS TO THE FEES AND DISBURSEMENTS AWARDED THE GUARDIAN OF DECEDENT’S PERSON AND PROPERTY; THE EXECUTOR WAS ENTITLED TO DISCOVERY PURSUANT TO CPLR 408 IN THE SPECIAL PROCEEDING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the executor of decedent’s estate (Oppedisano) was entitled to a hearing and discovery with respect to the fess and disbursements awarded to the guardian of decedent’s person and property:

… [T]here are disputed issues of fact as to the accuracy and completeness of the guardian’s final account, and whether the guardian failed to adequately investigate the alleged misappropriation of the decedent’s assets and should be denied fees and/or surcharged for breaching his fiduciary duties. Under such circumstances, the Supreme Court erred in denying Oppedisano’s objections to the guardian’s final account without conducting a hearing … .

Pursuant to CPLR 408, leave of court generally is required for disclosure in a special proceeding … . Insofar as discovery tends to prolong a case, and therefore is inconsistent with the summary nature of a special proceeding, such disclosure is granted only where it is demonstrated that there is need for such relief … . When leave of court is granted, disclosure takes place in accordance with CPLR 3101(a), which generally provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action” … . The Court of Appeals has interpreted the phrase “material and necessary” liberally as requiring, upon request, disclosure “of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” … . * * *

Oppedisano demonstrated that the requested disclosure was material and necessary to establishing his objections that the guardian’s final account was inaccurate and/or incomplete and that the guardian breached his fiduciary duties and should be denied fees and/or surcharged, and there was no contravening demonstration that the proposed discovery would be prejudicial or unduly burdensome, would violate confidentiality, or would unduly delay the case. Matter of Giuliana M. (DeCarolis), 2023 NY Slip Op 05262, Second Dept 10-18-23

Practice Point: Here the executor was entitled to a hearing on his objections to the fees and disbursements awarded decedent’s guardian and was entitled to discovery pursuant to CPLR 408. In a special proceeding discovery is by leave of court.

 

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THE FIVE-YEAR DELAY BETWEEN PLAINTIFF-DECEDENT’S DEATH AND THE MOTION TO SUBSTITUTE AN ADMINISTRATOR DID NOT WARRANT DISMISSAL OF THE ACTION; DECEDENT HAD BEEN AWARDED SUMMARY JUDGMENT ON LIABILITY IN THIS TRAFFIC-ACCIDENT CASE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the four year delay in appointment of an administrator and the addition one year in moving for substitution in this traffic accident case did not warrant dismissal of the action:

… [T]he approximately four-year delay in obtaining letters of administration followed by an approximately one-year delay in moving for substitution shows a lack of diligence … . However, even if the “explanation for the delay is not satisfactory, the court may still grant the motion for substitution if there is no showing of prejudice and there is potential merit to the action, in light of the strong public policy in favor of disposing of matters on the merits” … .

Here, where the decedent was awarded summary judgment on the issue of liability against the defendants, the action has potential merit … . Further, the defendants provided mere “conclusory allegations of prejudice based solely on the passage of time” … . This record reflects that the defendants will suffer little or no prejudice as a result of the delay, particularly because this case, which is set for a trial on damages only, is likely to turn on medical records and an extant deposition transcript … . Hemmings v Rolling Frito-Lay Sales, LP, 2023 NY Slip Op 05125, Second Dept 10-11-23

Practice Point: Plaintiff had been awarded summary judgment on liability in this traffic accident case. Plaintiff died and there was a five-year delay before the motion to substitute an administrator. The action should not have been dismissed.

 

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HERE THE BENEFICIARY OF THE WILL WAS IN A CONFIDENTIAL RELATIONSHIP WITH THE DECEDENT AND THE WILL WAS PREPARED BY AN ATTORNEY ASSOCIATED WITH THE BENEFICIARY; THE UNDUE INFLUENCE OBJECTIONS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Surrogate’s Court, determined the objections to probate of the will alleging undue influence should not have been dismissed. Here the will was prepared by an attorney for a beneficiary of the will:

“Generally, [t]he burden of proving undue influence . . . rests with the party asserting its existence . . . . Where, however, there was a confidential or fiduciary relationship between the beneficiary and the decedent, [a]n inference of undue influence arises which requires the beneficiary to come forward with an explanation of the circumstances of the transaction . . . , i.e., to prove the transaction fair and free from undue influence” … . Here, there are questions of fact whether the will’s sole beneficiary and her husband were in confidential relationships with decedent and, if so, whether the will was free from undue influence, which preclude judgment as a matter of law.

Further, where, as here, “a will has been prepared by an attorney associated with a beneficiary, an explanation is called for, and it is a question of fact . . . as to whether the proffered explanation is adequate” … . Matter of Cher, 2023 NY Slip Op 05062, Fourth Dept 10-6-23

Practice Point: Here issues of fact re: undue influence were raised by the beneficiary’s confidential relationship with the decedent and by association between the beneficiary and the attorney who drafted the will.

 

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PLAINTIFF’S DECEDENT’S COUNSEL IN THIS SLIP AND FALL CASE DID NOT SEEK LETTERS OF ADMINISTRATION FOR FIVE YEARS AFTER PLAINTIFF’S DECEDENT’S DEATH; THE ACTION SHOULD HAVE BEEN DISMISSED PURSUANT TO CPLR 1021 (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the slip and fall action should have been dismissed. The slip and fall occurred in 2013. The plaintiff died in 2015.and the letters of administration were issued in 2021. Plaintiff’s attorney’s failure to move for substitution of a representative within a reasonable time warranted dismissal:

CPLR 1021 provides as follows: “A motion for substitution may be made by the successors or representatives of a party or by any party . . . . If 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 . . . . [I]f the event requiring substitution is the death of a party, and timely substitution has not been made, the court, before proceeding further, shall, on such notice as it may in its discretion direct, order the persons interested in the decedent’s estate to show cause why the action or appeal should not be dismissed” (emphasis added).

In determining reasonableness, a court should consider the plaintiff’s diligence in seeking substitution, prejudice to the other parties, and whether the action is shown to have potential merit … . Here, the unexplained, more than five-year delay in seeking letters of administration shows a lack of diligence … . Further, no demonstration of a potentially meritorious cause of action was made. Neither the attorney affirmation, complaint, bill of particulars, nor supplemental bill of particulars constituted an affidavit of merit, as counsel had no personal knowledge of the facts of this case … . Since an affidavit of merit was not submitted and no reasonable justification for the delay in petitioning for letters of administration was provided, the Supreme Court should have granted that branch of Nargis’s motion which was pursuant to CPLR 1021 to dismiss the complaint insofar as asserted against it … . Mesniankina v 302 BBA, LLC2023 NY Slip Op 04765, Second Dept 9-27-23

Practice Point: If your client dies and you wait five years before substituting an administrator for the decedent, you risk dismissal pursuant to CPLR 1021.

 

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EVERY CAUSE OF ACTION WAS ERRONEOUSLY DISMISSED AS TIME-BARRED; THE PROPER CRITERIA FOR DETERMINING THE CORRECT STATUTES OF LIMITATIONS DISCUSSED IN SOME DETAIL (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined several causes of action including fraud, breach of fiduciary duty, breach of constructive trust, and breach of contract should not have been dismissed as time-barred:

“‘[W]here an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8)'” … . * * * … [P]laintiffs discovered the alleged fraud in 2019 and the cause of action was timely commenced within two years. * * *

… [T]he statute of limitations on the cause of action for the imposition of a constructive trust did not begin to run until 2019, when [defendant] allegedly breached his promise … . …

“[I]n order to determine the statute of limitations applicable to an action for a declaratory judgment, a court must examine the substance of the action. Where it is determined that the parties’ dispute can be, or could have been, resolved in an action or proceeding for which a specific limitation period is statutorily required, that limitation period governs” … . * * *

… Supreme Court erred in concluding that the causes of action alleging fraud in the inducement and promissory estoppel are time-barred. The statute of limitations for those causes of action is six years … . …

The statute of limitations applicable to a breach of contract cause of action is six years (see CPLR 213[2]), “and begins at the time of the breach, even when no damage occurs until later, and even though the injured party may be ignorant of the existence of the wrong or injury” … . Statharos v Statharos, 2023 NY Slip Op 04226, Second Dept 8-9-23

Practice Point: Here the criteria for determining the applicable statute of limitations for breach of fiduciary duty, fraud, breach of constructive trust, declaratory judgment, promissory estoppel, fraud in the inducement and breach of contract are discussed in some detail.

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THE PARTY SEEKING A CONTEMPT FINDING DID NOT DEMONSTRATE PREJUDICE FROM THE FAILURE TO COMPLY WITH ONE COURT ORDER AND THE OTHER COURT ORDER DID NOT EXPRESS AN UNEQUIVOCAL MANDATE; CONTEMPT FINDING REVERSED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the evidence did not support a contempt finding against the trustee of a special needs trust (Wiltshire). The guardian of the incapacitated person (Daniels) demonstrated that Wiltshire failed to provide an accounting and failed to promptly pay certain expenses, but the proof of Wiltshire’s alleged failure to comply with a court order was not sufficient to support a contempt finding. For instance, it was not demonstrated that Daniels was prejudiced by Wiltshire’s inaction:

“In order to find that contempt has occurred in a given case, it must be determined that a lawful order of the court, clearly expressing an unequivocal mandate, was in effect. It must appear, with reasonable certainty, that the order has been disobeyed. Moreover, the party to be held in contempt must have had knowledge of the court’s order. . . . Finally, prejudice to the right of a party to the litigation must be demonstrated” . “The burden of proof is on the proponent of a contempt motion, and the contempt must be established by clear and convincing evidence” … .

Here, Daniels did not establish that she was prejudiced in any way by Wiltshire’s failure to furnish an accounting of the SNT in violation of the … so-ordered stipulation … . Moreover, the [other] order directed Wiltshire to pay Daniels’s guardianship fees from the SNT, but did not provide a deadline for the payment. That order thus did not clearly express an unequivocal mandate which would support holding Wiltshire in contempt of court … . Matter of Serena W., 2023 NY Slip Op 03797, Second Dept 7-12-23

Practice Point: A party seeking a contempt finding must demonstrate prejudice from the failure to comply with a court order.

Practice Point: In order to support a contempt finding, the subject order must include an unequivocal mandate which was not obeyed.

 

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IN THIS SIDEWALK SLIP AND FALL CASE, THE DEFENDANT PROPERTY OWNERS HAD DIED AT THE TIME THE ACTION AGAINST THEM WAS COMMENCED; THAT ACTION WAS A NULLITY; THEREFORE THE MOTION TO AMEND THE COMPLAINT TO SUBSTITUTE THE EXECUTOR SHOULD HAVE BEEN DENIED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the sidewalk slip and fall action brought against defendant property owners was a nullity because the property owners had died before the suit was commenced. Because the action was a nullity, the motion to amend the complaint to substitute the executor as a party should not have been granted:

“A party may not commence a legal action or proceeding against a dead person” … . The deaths of Leon Chain and Hanka Chain (hereinafter together the decedents) prior to the commencement of this action rendered the action, insofar as asserted against them, a legal nullity from its inception. The plaintiff was instead required to commence an action against the personal representative of the decedents’ estates … . Moreover, even assuming that Ziv was the duly appointed executor of each of the decedents’ estates, the decedents were never a party to the action since they died before the commencement of the action, and the decedents’ estates could not be brought into the action by substitution or by amendment of the caption (see CPLR 1015[a]; 1021 …). The plaintiff’s attempt to amend the complaint to designate the purported executor of the decedents’ estates as a defendant in the place of the decedents was invalid and ineffective to retroactively render the action properly commenced against the decedents’ estates … . Hussain v Chain, 2023 NY Slip Op 03455, Second Dept 6-28-23

Similar issues and result in a foreclosure action: Waterfall Victoria Master Fund, Ltd. v Estate of Dennis F. Creese, 2023 NY Slip Op 03497, Second Dept 6-28-23

Practice Point: Here the defendants had died at the time the action was commenced. That action was therefore a nullity. The complaint could not be amended to substitute the executor as a party.

 

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THE EMAIL EXCHANGES BETWEEN ATTORNEYS DID NOT CONSTITUTE A VALID SETTLEMENT AGREEMENT AND DID NOT MEET THE STATUTORY REQUIREMENTS OF A STIPULATION OF SETTLEMENT; THE DISSENTERS ARGUED THE EMAIL EXCHANGES EVINCED AN ENFORCEABLE AGREEMENT (THIRD DEPT).

​The Third Department, reversing Surrogate’s Court, determined: (1) the email exchanges between the parties’ attorneys did not constitute a settlement agreement; and (2) to be valid any stipulation of settlement must be placed on the record in open court, reduced to a court order and contained in a writing subscribed by the parties or counsel (not done here). The case concerns a dispute over the distribution of the estate of the deceased between the deceased’s daughter and wife. There was a two-justice dissent which argued a valid settlement agreement had been reached. The dissent made no mention of the statutory requirements for a stipulation of settlement:

Surrogate’s Court erred in finding that a binding agreement was formed, as the parties did not mutually assent to all material terms. To the extent that the daughter’s counsel asserts that the initial email set out an overview of the material terms to which the parties agreed during the ADR session, we note that such verbal out-of-court agreements are insufficient to form the basis for a stipulation of settlement (see CPLR 2104 …). The initial email and the subsequent correspondence also fail to establish that the parties reached an agreement. * * *

We also remind the parties that, to be enforceable, stipulations of settlement require more than just an agreement among the parties. Once the parties to an active litigation reach an agreement, they must (1) place the material terms of such agreement on the record in open court, (2) reduce them to a court order which is then signed and entered or (3) contain them in a writing subscribed by the parties or their counsel (see CPLR 2104 …). Matter of Eckert, 2023 NY Slip Op 03270, Third Dept 6-15-23

Practice Point: Here there was a question whether email exchanges between the parties’ attorneys after a settlement conference formed an enforceable settlement agreement. The majority said “no” and the two dissenters said “yes.” Although the issue does not seem to be determinative in this decision, the majority noted that the statutory requirements for a stipulation of settlement were not met (open court, reduced to an order, writing signed by the parties or counsel).

 

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IN THESE ACTIONS BY INVESTORS AGAINST TRUSTEES STEMMING FROM THE COLLAPSE OF RESIDENTIAL MORTGAGE-BACKED SECURITIES (RMBS) THE COURT HELD (1) CLAIMS AGAINST TRUSTEES ARE NOT PROHIBITED BY A NO-ACTION CLAUSE (2) THE TRUSTEES WERE NOT REQUIRED TO ENFORCE REPURCHASE OBLIGATIONS AND (3) THE TORT CLAIMS WERE DUPLICATIVE OF THE BREACH OF CONTRACT CLAIMS (CT APP).

​The Court of Appeals, reversing (modifying) the appellate division, over two dissents, in these actions by investors against the trustees stemming from the collapse of residential mortgage-backed securities [RMBS], determined (1) claims against a trustee are not precluded by a “no action” clause, (2) trustees are not required to enforce repurchase obligations, and (3) the tort claims are duplicative of the breach of contract claims:

… RMBS [residential mortgage-backed securities] are financial instruments, popular in the mid-2000s, backed by individual mortgage loans …  The securitization process involves a “sponsor” who acquires a bundle of loans from banking institutions (“originators”) and sells the pooled loans to a “depositor,” who places the loans into a trust … . The trust issues certificates purchased by investors, who are entitled to a portion of the revenue stream from the borrowers’ payments … . The mortgage loans in the trust are serviced by a “servicer,” a party typically affiliated with the sponsor or originator. Each trust has a Trustee which acts on behalf of the Trust and whose responsibilities are prescribed by the securitization trusts’ governing agreements. While our previous RMBS cases have been brought by RMBS trustees, investors, or their insurers against RMBS sponsors, depositors, servicers, and originators (collectively, obligated parties) to recover for losses on the certificates, here the investors are suing the RMBS Trustees. * * *

… [C]laims against the trustee . . . cannot be prohibited by a no-action clause” … . “Because a standard no-action clause vests in the trustee all of the securityholders’ rights to bring suit, making the trustee the only path to a remedy, courts have been unwilling to enforce such clauses when the trustee’s conflicts or irrationality bar that path to relief” … . … [t]he Trustee cannot not sue itself ,,, and therefore compliance was not required. * * *

Defendants moved to dismiss plaintiffs’ claims that they breached the governing agreements by failing to enforce repurchase obligations, arguing that these agreements do not impose such a duty on trustees…. . We … hold that the governing agreements do not impose on defendants an affirmative duty to enforce repurchase obligations and so those claims should be dismissed. * * *

We hold that, to the extent any tort claims remain, they should be dismissed as duplicative of the breach of contract claims. IKB Intl., S.A. v Wells Fargo Bank, N.A., 2023 NY Slip Op 03302, CtApp 6-15-23

Practice Point: Here residential mortgage-backed securities (RMBS) investors sued the trustees. The actions were not prohibited by no-action clauses. The trustees were not obligated to enforce repurchase agreements. And the tort claims were duplicative of the breach of contract claims.

 

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THE ESTATE WAS A NECESSARY PARTY IN THE FORECLOSURE ACTION; THE COURT SHOULD DETERMINE WHETHER THE NECESSARY PARTY CAN BE SUMMONED AND, IF NOT, WHETHER THE ACTION CAN CONTINUE IN THE PARTY’S ABSENCE; THE FACT THAT THE STATUTE OF LIMITATIONS HAS RUN DOES NOT PRECLUDE SUMMONING THE NECESSARY PARTY (SECOND DEPT).

The Second Department, modifying Supreme Court, explained the proper procedure where it is alleged the complaint should be dismissed for failure to include a necessary party, here the failure to include an estate in a foreclosure action. First the court should determine whether the party can be summoned, noting that the expiration of the statute of limitations is does not bar summoning the party. Second, if the party cannot be summoned the court should determine whether the action can continue in the party’s absence:

“Pursuant to RPAPL 1311 (1), ‘necessary defendants’ in a mortgage foreclosure action include, among others, ‘[e]very person having an estate or interest in possession, or otherwise, in the property as tenant in fee, for life, by the courtesy, or for years, and every person entitled to the reversion, remainder, or inheritance of the real property, or of any interest therein or undivided share thereof, after the determination of a particular estate therein'” … . “Particularly where, as here, the plaintiff seeks a deficiency judgment, and alleges a default in payment subsequent to the death of the deceased mortgagor, the estate of the mortgagor is a necessary party to the foreclosure action” … .

When a necessary party has not been made a party and is “subject to the jurisdiction” of the court, the proper remedy is not dismissal of the complaint, but rather for the court to order that the necessary party be summoned (see CPLR 1001[b] …). Contrary to the intervenors’ contention, the Supreme Court’s ability to direct joinder of a representative of [the] estate at this juncture is not affected by the purported running of the statute of limitations, because the expiration of a statute of limitations is not a jurisdictional defect … .  … [W]hen jurisdiction over an absent necessary party “can be obtained only by [that party’s] consent or appearance, the court, when justice requires, may allow the action to proceed without [that party],” upon consideration of various enumerated factors (CPLR 1001[b] …). U.S. Bank Trust N.A. v Germoso, 2023 NY Slip Op 02704, Second Dept 5-17-23

Practice Point: Here an estate was a necessary party in the foreclosure action. The proper procedure is for the court to determine if the party can be summoned, and, if not, whether the action can continue in the party’s absence. The fact that the statute of limitations had run did not preclude summoning the estate.

 

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